Trump Reverses Crypto Reporting Rule, Boosts Innovation
In a significant policy shift, President Donald Trump has signed an executive order that eliminates the requirement for certain cryptocurrency platforms to report transaction data to the Internal Revenue Service (IRS). This decision nullifies the “DeFi Broker Rule,” a regulation introduced during former President Joe Biden’s administration aimed at enhancing oversight of cryptocurrency trading to combat tax evasion. The rule, which was set to take effect in 2026, faced backlash from crypto advocates who argued it imposed unrealistic compliance burdens on decentralized exchanges.
Details of the Policy Reversal
The executive order signed by Trump effectively cancels the “Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales” rule. This regulation was designed to require decentralized exchanges to report their customers’ total digital asset sales to the IRS, a move intended to improve tax compliance in the rapidly evolving cryptocurrency market. Critics of the rule contended that decentralized exchanges, being automated software applications rather than traditional brokers, could not feasibly comply with such reporting requirements.
US Representative Mike Carey from Ohio, who participated in the signing ceremony, emphasized the significance of this action, noting that it marks the first cryptocurrency bill signed into law by a sitting US President. Carey stated that the DeFi Broker Rule unnecessarily hindered innovation and infringed on the privacy of American citizens. He argued that the IRS should focus on its existing responsibilities rather than managing an influx of new filings that the agency is ill-equipped to handle during tax season.
Financial Implications and Legislative Background
The now-repealed rule had the potential to generate up to $4 billion for the US Treasury, according to reports. In March, the US Senate passed a resolution advocating for the overturning of this regulation, citing concerns that it imposed excessive compliance burdens on American decentralized finance (DeFi) companies. The Senate’s statement highlighted that the rule would stifle innovation and raise significant privacy issues regarding the sharing of taxpayers’ personal information.
Supporters of the repeal argue that the previous administration’s approach to cryptocurrency regulation was overly restrictive and detrimental to the growth of the sector. The Senate’s resolution reflected a growing consensus that the regulatory framework needed to adapt to the unique characteristics of decentralized finance, which operates differently from traditional financial systems.
Trump’s Broader Crypto Strategy
Since returning to the White House, Trump has taken several steps to promote cryptocurrency. He established a Crypto Task Force under the Securities and Exchange Commission (SEC) to expedite the development of crypto regulations. Additionally, he signed an executive order to create a Bitcoin reserve and a crypto stockpile, signaling a commitment to positioning the US as a leader in the global cryptocurrency landscape.
Recent developments have also seen the SEC dropping cases against several prominent crypto firms, including Binance and Ripple, providing further relief to the industry. As part of his presidential campaign, Trump has pledged to transform the United States into the world’s “crypto capital,” a vision that aligns with his administration’s recent regulatory changes.
Shifts in Enforcement Strategies
In a related move, the US Department of Justice recently disbanded the National Cryptocurrency Enforcement Team (NCET), which was established under the Biden administration to investigate cryptocurrency businesses. This decision reflects a broader shift in the federal approach to cryptocurrency regulation, moving away from stringent enforcement towards a more supportive environment for innovation in the sector.
The recent executive order and the disbanding of the NCET signal a new era in US cryptocurrency policy, one that aims to foster growth while balancing the need for oversight. As the landscape continues to evolve, the implications of these changes will be closely monitored by industry stakeholders and regulators alike.
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