Senate Vote on IRS Rule Impacting Cryptocurrency Industry
The U.S. Senate is gearing up for a pivotal vote this week aimed at overturning an Internal Revenue Service (IRS) regulation that has raised alarms within the cryptocurrency sector, particularly concerning decentralized finance (DeFi). According to a source familiar with the Senate’s agenda, this regulatory change, introduced by the IRS in December, extends the requirement for brokers to disclose specific tax information, which inadvertently encompasses numerous DeFi projects.
In response, some senators are leveraging the Congressional Review Act (CRA) to nullify this regulation, alongside another regulatory measure from the Consumer Financial Protection Bureau (CFPB) regarding digital payment applications. Senator Ted Cruz has taken the lead by introducing a resolution under the CRA to eliminate the IRS rule, while Senator Pete Ricketts is advocating for the resolution targeting the CFPB’s regulation. Both initiatives are slated for action this week, the source revealed.
“The Biden administration has consistently worked to hinder financial innovation in the United States, which risks pushing digital asset companies to operate abroad,” stated Majority Leader John Thune. “The Senate is committed to dismantling these cumbersome regulations one by one to restore financial freedom for Americans.”
Last week, the House Financial Services Committee advanced a corresponding resolution to revoke the IRS rule, setting the stage for a vote on the House floor. A successful Senate action would further galvanize this initiative, which requires approval from both chambers of Congress and the President’s signature to become law.
Senator Cruz, a Texas Republican and prominent critic of the IRS rule, remarked, “In a last-minute maneuver, the Biden administration enacted a decentralized finance regulation that will directly undermine American innovation in cryptocurrency and push development overseas. This week, Congress will vote on my resolution to rescind that regulation, and I am optimistic about our chances.”
It is crucial to note that the process for reversing federal agency rules is bound by strict timelines. The CRA stipulates a limited window of legislative days following the approval of each regulation for lawmakers to act. Similar to the priorities set during President Donald Trump’s initial term, the current administration is also focused on overturning certain regulations instituted by its predecessor.
The CFPB rule in question mandates that major technology firms offering digital wallets and payment applications, which process significant volumes of consumer payments—including giants like Apple, Amazon, and Google—be subjected to more stringent regulations akin to those imposed on large U.S. banks.
Senator Ricketts, a Republican from Nebraska, commented, “In the wake of their electoral defeat, the Biden-Harris administration hastily implemented a last-ditch rule targeting non-bank digital consumer payment applications. This one-size-fits-all approach is a solution in search of a problem and unnecessarily expands the CFPB’s authority. Our legislation will eliminate barriers to innovation, reduce bureaucratic red tape, and support job creators.”
The two regulations finalized in the waning days of President Joe Biden’s administration originated from agencies that have become focal points of scrutiny among Republican lawmakers: the IRS and the CFPB. Taxation related to cryptocurrency has emerged as a key concern for the new administration, aligning with the party’s objective to diminish the influence of the consumer-protection regulator.
In a related development, the White House is organizing a crypto summit scheduled for March 7, as announced by David Sacks, the former crypto czar under Trump, through social media. The summit is expected to gather industry founders, CEOs, and relevant regulatory bodies to discuss the evolving landscape of cryptocurrency.
