Treasury Department, IRS remove controversial 'crypto broker' tax rule requiring non-custodial service providers to file customer transaction info

The U.S. Department of the Treasury and the Internal Revenue Service formally removed a crypto broker rule that had required decentralized exchanges and other protocols to submit customer transaction information for tax purposes. 

The official repeal ends a years-long saga surrounding this controversial crypto tax rule, which many crypto advocates said was theoretically impossible to enforce. While the Treasury's rule aimed  to increase financial transparency, others argued it raised privacy concerns while stunting the nascent decentralized finance (DeFi) sector and crypto industry more broadly in the U.S. 

"Under the joint resolution and by operation of the CRA [Congressional Review Act], this final rule has no legal force or effect," the Treasury wrote in a Thursday release . "The Department of the Treasury and the IRS hereby remove this final rule from the Code of Federal Regulations (CFR) and revert the relevant text of the CFR back to the text that was in effect immediately prior to the effective date of this final rule." 

The Biden administration first attempted to implement the "crypto broker" rule in November 2021 via the Infrastructure Investment and Jobs Act, which expanded the definition of a "broker" to crypto network participants in an attempt to close an alleged informational gap. While the Treasury softened that definition to exclude crypto miners or node operators, which often have no way of collecting customer transaction data, the IRS finalized the rule for "DeFi brokers" in December 2024.

Under the regulation, non-custodial service providers would have to act like traditional securities brokers and collect customer names and addresses for tax collection purposes. 

The rule faced backlash from DeFi industry participants who said that autonomous blockchain protocols are not equipped to collect this data. Texas Senator Ted Cruz led an effort to introduce a CRA resolution seeking to repeal the IRS's crypto rule in January of this year. 

Congress voted to overturn the crypto broker rule in March, with President Donald Trump signing a resolution to repeal the rule on April 11, The Block previously reported.