IRS rule dies, but crypto still on Treasury’s radar

The Treasury has on Thursday quietly erased a major crypto reporting rule that would’ve forced platforms across the industry, both centralized and decentralized, to hand over user trade data to the IRS. The rule, known as TD 10021 (RIN 1545-BR39), had already been repealed by Congress, and President Donald Trump signed off on it in April, killing the expanded IRS definition of a “broker.” TD 10021 had originally been built under Section 6045 of the tax code and backed by the 2021 Infrastructure Investment and Jobs Act. It was approved in December 2024, and it would’ve made DeFi protocols report customer activity as if they were traditional brokers. That meant identifying users and tracking all transactions, even though these platforms don’t hold customer data or custody crypto. It was scheduled to go live in 2025, with full enforcement planned for 2026. Congress shuts it down, Trump signs it off The rejection didn’t come out of nowhere. The expanded broker rule faced backlash from the minute it was announced. Developers, privacy advocates, and policy groups pushed back hard. Their argument? DeFi platforms can’t comply with rules written for custodians. Most DeFi tools don’t have sign-ins, don’t store names, and don’t control wallets. There’s nothing to report. Miller Whitehouse-Levine, CEO of the DeFi Education Fund, said, “You can’t report data you don’t have.” His group wasn’t alone. Industry organizations warned that if the rule passed, it would crush open-source development in the U.S. and push teams offshore. Even wallet providers, who don’t touch funds, were getting swept into the rule’s broad language. By early 2025, opposition made it to Congress. Lawmakers used the Congressional Review Act to repeal the regulation entirely. It passed the Senate 70–28, then cleared the House. Trump signed the bill into law on April 11, officially cutting the IRS’s plan off before it could take effect. The law was clear: Congress didn’t want DeFi treated like brokerage firms. The Treasury’s withdrawal this week confirms it got the message. In its filing, the department acknowledged that broker reporting should only apply to custodial exchanges and intermediaries. That means platforms like Coinbase or Binance US are still covered. But the rule no longer touches decentralized protocols or front-end developers. IRS rule dies, but crypto still on Treasury’s radar The now-scrapped rule had introduced a new form—1099-DA—for crypto brokers to file with the IRS. It required detailed transaction data: amounts, wallet addresses, and identities. The IRS designed it to mirror the way stock brokerages report trades. But applying that to DeFi was a mess. The language in the rule was so wide that even tools with no control over user funds, like token aggregators and some wallet interfaces, would have had to comply. Critics called it unworkable. Many also said it violated basic privacy rights. Still, the Treasury isn’t stepping away from crypto altogether. Under Scott Bessent, the department has been active elsewhere. Throughout 2023 and 2024, it’s issued sanctions against players in Iran’s shadow banking networks and flagged North Korean-linked hackers suspected of laundering stolen crypto. That tells you they’re still watching illicit finance closely, even as they ease up on domestic crypto developers. On the global front, the Treasury is locked into bigger financial policy debates. It’s part of ongoing G7 discussions on setting a global minimum tax and is also working through tariff negotiations that tie into international digital trade. These talks reflect broader U.S. efforts to stay aligned with allies on tax and finance, even while scaling back harsh local rules. Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now

Source: Cryptopolitan