President Donald Trump has signed a congressional resolution eliminating an Internal Revenue Service (IRS) rule targeting DeFi projects, marking a significant victory for the decentralized finance sector.
In a significant victory for the decentralized finance (DeFi) sector, President Donald Trump has signed a congressional resolution that eliminates an Internal Revenue Service (IRS) rule targeting DeFi projects. This move marks the first time a pro-crypto effort has advanced all the way through Congress.
Decentralized finance (DeFi) refers to financial services and systems that operate on a decentralized network, often utilizing blockchain technology.
This allows for peer-to-peer transactions, lending, borrowing, and other financial activities without the need for intermediaries like banks.
DeFi applications include stablecoins, decentralized exchanges, and lending platforms.
According to a report by DeFi Pulse, the total value locked in DeFi protocols reached $22.5 billion in 2022, highlighting its growing popularity.
A Narrowly Focused IRS Rule Gets the Axe
The IRS rule in question was approved in the final days of former President Joe Biden‘s administration and would have required DeFi platforms to be treated as brokers, requiring them to track and report user activity. However, this rule has been formally struck down, according to Representative Mike Carey, an Ohio Republican who backed the effort.
A Bipartisan Effort
The elimination of the IRS rule was made possible by a strong bipartisan showing in both the Senate and House of Representatives. This marks a significant victory for the crypto sector, which has long been advocating for greater clarity on regulatory issues.
Bipartisan efforts refer to collaborative actions between politicians from different parties working together on a particular issue or legislation.
These efforts aim to find common ground and compromise, often resulting in more effective solutions.
According to a study, 75% of Americans believe bipartisan cooperation is essential for good governance.
Bipartisan bills have successfully passed Congress, addressing issues like healthcare reform and infrastructure development.
Notable examples include the Bipartisan Budget Act of 2018 and the First Step Act of 2018.
What’s Next? Stablecoin Legislation Takes Center Stage
While the DeFi tax resolution is a major win, it’s not the only issue on the horizon for the crypto sector. Similar bills have passed relevant committees in both the House and Senate, and are now awaiting floor votes in each chamber. If approved, these bills could lead to a process of melding the two efforts into one compromise version.
A Possible Timeline
President Trump has called for a bill to arrive on his desk by August, which is still possible according to lawmakers behind the legislation. This timeline suggests that the stablecoin legislation could be finalized in the coming months, providing further clarity and guidance for the crypto sector.
The growth of stablecoins has led to increased scrutiny from regulatory bodies worldwide.
In the United States, the Securities and Exchange Commission (SEC) considers stablecoins as securities if they are issued by a company and traded on public markets.
The Commodity Futures Trading Commission (CFTC) regulates stablecoins as commodities.
In Europe, the European Securities and Markets Authority (ESMA) has warned about potential risks associated with stablecoins.
Regulatory frameworks for stablecoins are still evolving, with many countries exploring their own approaches.
The elimination of the IRS rule targeting DeFi projects marks an important milestone in the industry’s efforts to navigate regulatory issues. With this victory, the crypto sector is likely to continue pushing for greater clarity on regulatory matters, including stablecoin legislation and market rules for crypto transactions.
