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us-lawmakers-collaborate-to-block-irs-rule-threatening-defi-and-crypto-innovation
2025-01-24 06:00:09

US Lawmakers Collaborate to Block IRS Rule Threatening Defi and Crypto Innovation

Jenny Jones-author-image Jennifer Michele
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Representative Mike Carey and Senator Ted Cruz launched a resolution to repeal a recent IRS regulation about cryptocurrencies. Under the rule, DeFi participants are now regarded as "brokers," which also requires stringent reporting obligations.

They contend that it limits innovation and forces the sector abroad. Both industry associations and legislators help with the resolution. Its goal is to secure the American digital asset market. Although its future is still unclear, it increases questions about crypto laws.

Cruz, Carey Oppose Crypto Rule

On January 22, U.S. Senator Ted Cruz (R-Texas) and Representative Mike Carey (R-Ohio) claimed they had presented an agreement to reject a contentious Biden administration rule that opponents say might hurt the U.S. bitcoin market.

The Internal Revenue Service approved the regulation on December 30, 2024, transforming decentralized finance participants into "brokers" and imposing stringent reporting requirements on them. Cruz and Carey contend that this policy promotes innovation abroad and places excessive strain on the digital asset sector. Cruz stated as he announced the resolution:

“The goal of the Biden administration's regulation is to improve American cryptocurrency innovation abroad. The goal of defi technology, which is to enable people to buy, sell, and trade digital assets freely, is undermined by this legislation.”

"Innovation should be America's foremost goal, and this rule is the opposite," the senator claimed. "I recommend Congress to take up this resolution as soon as possible, pass it, and share it to the President."

Lawmakers Challenge IRS Overreach

Rep. Carey accepted, calling the regulation a "blatant overreach from the IRS" and requesting that too many new digital asset returns would strain IRS resources if it became affected. "We are honored to work with Senator Cruz on this significant goal to prevent undue complexity in the tax-filing process," he highlighted.

A combination of legislators and business associations have approved the resolution. In the Senate, Cruz was supported by Senators Cynthia Lummis (R-Wyo.), Tim Sheehy (R-Utah), Thom Tillis (R-N.C.), and Ted Budd (R-N.C.), while Carey handled the measure's introduction in the House.

The support of groups like the Digital Chamber, Defi Education Fund, Blockchain Association, and several state blockchain councils shows its significance to industry proponents. According to supporters, rejecting the rule will protect the digital asset industry and motivate innovation in the US.

Cruz and Carey's joint resolution, which calls for quick congressional action, is an essential attempt to combat regulatory overreach. Although it is unclear if the resolution will be finalized, it highlights the continuous discussions about how to maintain a balance between technological advancement and regulation in the bitcoin field.

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