In the latest pro-crypto pivot in the US, the Senate has quashed a rule submitted by the Internal Revenue Service relating to “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.”

The rule required decentralized finance platforms to report detailed information on customers to the IRS, starting for tax year 2027. It was aimed at improving tax compliance and treating DeFi the same way centralized exchanges and stock brokerages do.

The bipartisan vote, led by Senator Ted Cruz, argued that DeFi platforms are not traditional brokers and would face high compliance costs.

The repeal passed with a vote of 70 to 27, and every vote to keep the rule was by a Democrat, unsurprisingly.

DeFi Off The Hook

“The Democrats and Republicans can still do things together when they just try,” commented Coinbase chief legal officer Paul Grewal.

17 Democrats and all Republicans in the Senate just voted to repeal the IRS Defi Reporting Rule. Ds and Rs can still do things together when they just try. https://t.co/ajbGKCSbT1

“It’s a powerful statement of the importance of crypto. I think crypto was one of the major issues in the last election,” said Texan Senator Cruz, who added, “We just saw a really strong bipartisan repudiation of that regulation.”

Republicans are eyeing other Biden-administration rules using the Congressional Review Act, including regulations on appliances, oil and gas drilling, and rubber tire manufacturing.

Mike Kaercher, deputy director of the Tax Law Center at New York University, did not agree that repealing the rule was a good thing.

“It would encourage more of the digital asset industry to move into the shadows, making it more difficult to counter crimes ranging from tax evasion to fentanyl trafficking to terrorist financing,” he said, according to The Wall Street Journal.

DeFi total value locked had a recent resurgence with the crypto market rally but has since retreated 33% to $102 billion, according to DeFiLlama. It is still a long way from its December 2021 peak of $212 billion since DeFi is primarily Ethereum-based, and ETH has been battered this year.

Market Reaction

Crypto markets have seen a minor recovery over the past 24 hours, with total capitalization adding 2% to reach $2.97 trillion.

Bitcoin reclaimed $88,000 before a minor pullback as Commerce Secretary Howard Lutnick said that Trump was considering a pathway for tariff relief for Mexican and Canadian goods governed by the North American trade agreement.

Ethereum also made a minor 4% gain, but it remained at its lowest level for over a year, wallowing just over $2,150. There were larger gains for XRP, Cardano (ADA), Hedera (HBAR), and Bitcoin Cash (BCH).