The Blockchain Association urges Congress to support Senator Ted Cruz’s effort to repeal the IRS’s DeFi broker rule. The association represents 76 crypto organizations. It argues that the rule threatens privacy and innovation.
The rule changes the definition of a “broker” to include software interacting with DeFi protocols. Critics say this is a mislabeled technology. It forces software providers to follow strict reporting rules. These companies do not handle user funds but would still have to collect personal data.
Blockchain privacy at risk? The surveillance concerns
Privacy advocates warn about government overreach. The rule would require firms to track and report millions of user transactions. Many believe this would create unnecessary surveillance and increase compliance costs. Estimates suggest it could expand the government’s paperwork by one-third.
The rule also creates an uneven playing field. It applies only to U.S.-based DeFi companies, and foreign companies offering the same services would not have to comply. This could drive innovation overseas, which many believe places American firms at a serious disadvantage.
The rule was finalized at the end of the Biden administration. Critics argue that major policies like this should go through Congress. They say last-minute regulations should not make such big changes. The rule, they claim, misunderstands DeFi and its technology.
Senator Cruz uses the Congressional Review Act (CRA) to challenge the rule. The CRA allows Congress to repeal recent regulations that go beyond agency authority. His resolution, S.J.Res.3, would block the rule before it takes effect. The Blockchain Association and other crypto advocates are pushing lawmakers to support it.
If the rule stays, it could reshape DeFi in the U.S. Some believe it will weaken American leadership in blockchain innovation, while others warn that it could stifle industry growth.
Many in the crypto space see this as a turning point. If Congress blocks the rule, it could signal support for decentralized finance. If not, it could mark a shift toward heavier regulation. The debate is heating up. Lawmakers must decide whether to support the rule or strike it down.
