On January 22, 2025, U.S. Senator Ted Cruz (R-Texas) and Representative Mike Carey (R-Ohio) introduced a joint resolution under the Congressional Review Act (CRA) to nullify a controversial rule finalized by the Internal Revenue Service (IRS) on December 30, 2024. The rule redefines participants in decentralized finance (DeFi) as “brokers,” imposing stringent tax reporting obligations that critics argue would cripple the U.S. cryptocurrency industry and drive innovation abroad.
The Rule and Its Backlash
The IRS regulation requires DeFi protocols and front-end services to collect and report detailed transaction data from users, akin to traditional brokerage firms. Proponents claim this is necessary to combat tax evasion and enhance transparency, but industry stakeholders counter that DeFi systems are inherently decentralized and cannot feasibly comply without fundamentally altering their architecture. Senator Cruz stated: “The Biden administration’s rule attempts to drive American cryptocurrency innovation overseas. This regulation undermines the purpose of DeFi technology: to enable individuals to freely buy, sell, and exchange digital assets.” Representative Carey called it a “clear overreach from the IRS” that would overwhelm the agency with excessive new digital asset returns.
Bipartisan Support and Industry Alignment
The resolution is co-sponsored in the Senate by Senators Cynthia Lummis (R-Wyo.), Thom Tillis (R-N.C.), Tim Sheehy (R-Utah), and Ted Budd (R-N.C.), while Carey led the House effort. Prominent industry groups such as the Digital Chamber, Blockchain Association, DeFi Education Fund, and various state blockchain councils have voiced strong backing. They warn that the rule would not only burden developers but also push crypto talent and capital to more welcoming jurisdictions like the European Union, Singapore, and the United Arab Emirates, eroding America’s competitive edge in blockchain technology.
Outlook: A Test for the New Congress
With the Republican Party now controlling both chambers and a new Trump administration taking office, the resolution stands a realistic chance of passage. Under the CRA, a simple majority in both the House and Senate, followed by the President’s signature, can invalidate the rule and bar the IRS from issuing substantially similar regulations in the future. However, the process still requires bipartisan cooperation, as some Democrats may defend the rule on grounds of tax enforcement. The crypto industry is closely watching this effort as a bellwether of the new government’s stance on digital assets. If successful, it would mark the first major legislative win for crypto under the new political landscape; if it stalls, it could signal further regulatory battles ahead.
Regardless of the outcome, the Cruz-Carey resolution underscores the ongoing tug-of-war between innovation and oversight. For DeFi proponents, blocking this rule is a necessary step to preserve the open, permissionless nature of blockchain finance. For regulators, it raises the question of how best to adapt tax frameworks to decentralized systems without stifling the very technology that promises to reshape global money.