DeFi Companies Urge Congress to Overturn IRS Reporting Rule

🚨 Crypto Giants Push Back Against IRS Rule That Could Kill DeFi

Some of the biggest names in crypto—including Coinbase, a16z, Paradigm, Kraken, and Uniswap—are calling on Congress to repeal a last-minute IRS rule that could shake up DeFi in the U.S. The new rule, quietly pushed through at the tail end of the Biden administration, forces DeFi software providers to collect and report user data to the IRS—something that goes against everything DeFi stands for.

Now, the crypto industry is fighting back, arguing that the rule is not only bad for privacy but also a massive roadblock to financial innovation.

🔍 What’s the Big Problem?

There are two major issues with this IRS rule:

🏦 1. DeFi ≠ Traditional Finance (So Why Treat It Like a Bank?)

The rule forces crypto software providers—who just build the tools for DeFi—to act like brokers. That means they’d have to track user identities and report transactions to the IRS, even though DeFi is built specifically to avoid middlemen.

Think about it: Imagine if every time you used a vending machine, the company had to file a report on who you are and what you bought. That’s basically what the IRS wants for DeFi.

🔐 2. A Privacy Nightmare

To comply, DeFi platforms would have to collect and store sensitive user data—something that completely goes against the principles of decentralized finance. It also puts millions of Americans at risk by creating new targets for hacks and surveillance.

Plus, let’s be real: crypto users already worry about how much of their data is being tracked. Now, the IRS wants to take that to the next level? 🚨

🇺🇸 Why This Is Unfair to U.S. Crypto Companies

Here’s the kicker: This rule only applies to U.S. companies.

If a DeFi service is based outside the U.S., they don’t have to follow these rules—even if they serve American users. That means:

❌ U.S. companies get hit with red tape
✅ Foreign competitors get a free pass

Basically, the IRS is handing a competitive advantage to overseas crypto firms while making it harder for American companies to innovate.

🔥 The Fight to Kill the Rule

The crypto industry is rallying behind a push to repeal the rule before it takes effect. Senator Ted Cruz has introduced a proposal under the Congressional Review Act (CRA)—a legal mechanism to undo regulations that overstep their authority. If Congress acts quickly, this rule could be stopped before it causes serious damage.

⚡ TL;DR

• The IRS wants DeFi platforms to track and report user data, treating them like banks.
• This goes against DeFi’s core principles and creates a major privacy risk.
• Only U.S. crypto companies are affected, putting them at a huge disadvantage against foreign firms.
• Senator Ted Cruz is leading a push to repeal the rule before it can take effect.

🚀 The crypto world is watching—will Congress step up and protect DeFi?