As the Biden administration drew to a close, the Department of the Treasury and the Internal Revenue Service (IRS) published final regulations imposing new reporting requirements on "brokers" facilitating digital asset transactions on decentralized finance (DeFi) platforms. The final regulations cite as authority provisions of the Infrastructure Investment and Jobs Act (IIJA), signed into law in November 2021, that amended Code section 6045 to clarify the definition of broker as it relates to transfers of digital assets. Under the final regulations, persons providing DeFi "front-end services" that interface with users (e.g., web site interfaces) are treated as "brokers" and must collect both personal information (e.g., name and Social Security Number) and transactional data to report on new IRS Form 1099-DA. This notwithstanding the fact that, for DeFi platforms, transactions are generally executed through immutable "smart contracts," that the interface does not have access to or control. The regulations are applicable to sales of digital assets occurring on or after January 1, 2027. In issuing the final regulations, Treasury and the IRS sought to align digital asset reporting requirements for DeFi transactions with those imposed on centralized digital asset exchanges by final regulations published in July 2024. Given the unique features of DeFi, including the lack of access to or control over smart contract trading platforms, the rules were not received well by industry groups, and various efforts have been undertaken to pull back the rules — such as repeal under the Congressional Review Act (CRA). 

Congress is moving quickly to repeal the final DeFi regulations under the CRA: a Senate joint resolution passed on March 5, 2025, and a House of Representatives joint resolution passed on March 11. Due to the projected revenue impact of overturning the regulation, it is possible the Senate will need to vote a second time to comply with the constitutional requirement that revenue measures originate in the House. Under the CRA, there are only 60 legislative days from promulgation of a rule to pass the joint resolutions disapproving of the rule and secure the president's signature; however, this 60-day timeframe resets on the 15th legislative day in the House and the 15th session day in the Senate to provide for extended congressional review when a congressional session adjourns before a rule's full 60-day review ends. If the joint resolution is signed into law, the DeFi regulations — but not the digital asset reporting regulations applicable to centralized exchanges finalized last July — would be repealed, and a substantially similar rule could not be promulgated in their place, significantly limiting any future rulemaking by Treasury and the IRS in the DeFi space. While the CRA was used to repeal a record 16 regulations in Trump's first term, the CRA has previously not been used to repeal a tax regulation.

For more information, please contact:

Michael J. Desmond, mdesmond@milchev.com, 202-626-1575

Katherine Lewis, klewis@milchev.com, 202-626-5894

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