In a major development for the cryptocurrency industry, especially the decentralized finance (DeFi) space, former US President Donald Trump signed a bill on April 10 overturning a controversial IRS rule that had redefined decentralized exchanges as "brokers" for tax reporting purposes. This move is widely seen as a significant policy shift favouring the digital asset community, and it aligns with Trump’s recent positioning as a pro-crypto candidate for the 2025 elections.

What the IRS Rule Was About

In December 2024, during the final weeks of the Biden administration, the Internal Revenue Service (IRS) finalized a tax rule aimed at improving transparency and compliance in crypto trading. The rule was part of the agency’s broader effort to crack down on tax evasion within the fast-growing digital asset sector.

The regulation stemmed from the Infrastructure Investment and Jobs Act passed in 2021, which sought to include digital asset transactions in the US tax reporting framework. The act required crypto brokers to issue Form 1099s to both the IRS and their clients.

However, in a controversial move, the IRS expanded the definition of brokers to include decentralized finance (DeFi) platforms—systems that operate without traditional intermediaries and instead rely on smart contracts and blockchain protocols.

This meant that DeFi platforms, which typically do not have access to user identities or transaction histories, were expected to report user data to the IRS. The industry strongly opposed this, calling the rule "unworkable and misaligned" with how decentralized systems function.

Trump's Move to Reverse the Rule

On April 10, 2025, Donald Trump signed into law a bill that effectively nullifies this expanded broker definition. The legislation was passed through Congress earlier in the week and sent to Trump’s desk for approval.

The White House statement highlighted that the decision was in line with Trump’s policy to promote innovation in the digital asset space and protect the operational integrity of decentralized platforms.

This move represents a key win for the cryptocurrency industry, which had lobbied extensively against the IRS’s DeFi inclusion. Trump’s administration emphasized the importance of regulatory clarity and the need to avoid stifling innovation.

Crypto Industry's Response

Crypto industry players and DeFi developers celebrated the reversal, seeing it as a step towards more sensible and technologically informed regulation. Many DeFi operators had warned that the IRS rule would force them to shut down US operations or relocate abroad.

The challenge stemmed from the fact that DeFi platforms do not maintain user accounts or KYC data, making it virtually impossible for them to comply with broker reporting obligations.

Industry experts argue that treating DeFi like centralized exchanges overlooks the technical differences, and could lead to unnecessary crackdowns and misinterpretations of blockchain-based systems.

Trump’s Broader Crypto Strategy

This legislative action fits into Trump’s broader strategy to position himself as a pro-crypto leader. On the campaign trail, he has referred to himself as a "crypto president" and made overtures to the digital asset community, seeking financial support and voter interest from the industry.

In his first week back in office, Trump ordered the formation of a federal working group on cryptocurrency, tasked with drafting new, innovation-friendly regulations. He also signed an executive order to build a national stockpile of Bitcoin, citing concerns over digital currency sovereignty and the strategic value of cryptocurrencies.

These initiatives are widely seen as Trump’s attempt to build a favorable regulatory ecosystem for blockchain technology and digital assets, especially in contrast to what some in the industry viewed as hostile policies under the Biden administration.

Implications for the Crypto Ecosystem

The reversal of the IRS DeFi broker rule is expected to reignite interest in building decentralized platforms in the US. Legal uncertainty has been one of the key deterrents for crypto startups and developers, especially those operating in open-source and non-custodial ecosystems.

By removing the burden of impossible compliance, the US could once again become a favorable jurisdiction for DeFi innovation, attracting talent, capital, and startups back to its markets.

However, critics of the move argue that the lack of reporting from DeFi platforms could encourage tax evasion and illegal activities, calling for balanced frameworks that combine innovation with accountability.

Future of Crypto Regulation in the US

With this latest action, the spotlight is now on how the Trump administration will shape future crypto policy. There is speculation about:

• New tax frameworks specifically tailored to crypto and DeFi

• Stablecoin regulations that might support dollar-backed digital assets

• National cryptocurrency reserve strategies and central bank digital currency (CBDC) opposition

• Enhanced cybersecurity frameworks for digital wallets and smart contracts

The crypto industry remains cautiously optimistic. While the IRS rule rollback is a clear win, many are awaiting more comprehensive policy details from Trump’s working group and subsequent legislative proposals.

Conclusion

Donald Trump’s decision to roll back the IRS rule on DeFi exchanges marks a critical inflection point in US crypto policy. By listening to the industry and removing a burdensome regulation, the administration is signalling that crypto and blockchain innovation will be embraced rather than hindered under Trump’s leadership.

For now, DeFi platforms can breathe a sigh of relief, but the battle for sensible and sustainable crypto regulation is far from over. The coming months will determine whether the US can craft a regulatory environment that both encourages innovation and ensures tax compliance—a balance that has eluded lawmakers globally.

The Upcoming IPOs in this week and coming weeks are Aten Papers & Foam.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.