IRS Drops Controversial Rule Targeting Decentralized Exchanges

The U.S. Treasury and IRS have formally withdrawn a contentious crypto broker rule that would have required decentralized exchanges to report user transactions. The reversal follows a Congressional joint resolution signed into law, nullifying the regulation's legal standing.

Initially finalized in December 2024, the rule aimed to treat DeFi platforms like traditional brokers, mandating FORM 1099-DA filings for digital asset transactions. Implementation sparked immediate backlash from crypto industry participants who argued decentralized systems lack the infrastructure for such reporting.

The resolution marks a significant regulatory retreat after months of industry pressure. Market observers note the decision preserves operational flexibility for DeFi protocols while eliminating a potential compliance burden that could have stifled innovation.