U.S. Senate Set to Vote on IRS Rule Reversal

The U.S. Senate is gearing up for a vote this week aimed at reversing an IRS rule that the crypto industry views as a significant threat to decentralized finance (DeFi), according to a source familiar with Senate plans.

In December, the IRS attempted to broaden the definition of brokers required to report certain tax information, capturing crypto DeFi projects in its net. Some senators are seeking to use the Congressional Review Act (CRA) to eliminate this rule, alongside an additional regulation from the Consumer Financial Protection Bureau (CFPB) concerning digital payment applications.

Senator Ted Cruz has introduced a CRA resolution to scrap the IRS rule while Senator Pete Ricketts is backing the CFPB resolution. Both resolutions are set for action this week, the source revealed.

“The Biden administration did everything it could to stifle financial innovation in the United States, threatening to send digital asset companies overseas,” stated Majority Leader John Thune. “The Senate is working to undo these burdensome regulations one at a time to restore financial freedom for the American people.”

Last week, the House Financial Services Committee moved to bring a corresponding IRS resolution to the House floor for a vote. A successful Senate action would further advance this initiative, requiring approvals from both chambers and the president’s signature to become law.

Cruz expressed concern over the IRS’s midnight issuance of the decentralized finance rule, asserting that it would harm cryptocurrency innovation in the U.S. and push development overseas. He voiced confidence in the upcoming vote to repeal the regulation.

Reversals of federal agency rules must occur within strict timelines enforced by the CRA, based on a limited number of legislative days since each rule’s approval. Similar to the first administration of Donald Trump, the current administration prioritizes undoing actions taken by its predecessor’s regulators.

The CFPB rule mandates that major tech companies offering digital wallets and payment applications, processing a significant volume of consumer payments—such as Apple, Amazon, and Google—be regulated more rigorously like large U.S. banks.

“Following their election loss, the Biden-Harris CFPB rushed an eleventh-hour rule to attack non-bank digital consumer payment applications,” stated Senator Ricketts. “This one-size-fits-all solution seeks a nonexistent problem and unnecessarily expands the CFPB’s authority. Our legislation aims to eliminate barriers to innovation, reduce red tape, and support our job creators.”

The two rules finalized in the last days of Biden’s administration are under scrutiny from Republican lawmakers, particularly targeting the IRS and CFPB. U.S. taxation and regulating consumer-protection agencies remain top priorities for the new administration.

Additionally, the White House is planning a crypto summit for March 7, according to Trump’s crypto czar, David Sacks, who shared this information on social media. The summit will include founders, CEOs, and relevant regulators.

Read More: U.S. House Committee Advances Effort to Erase IRS’ DeFi Tax Rule