IRS DeFi rule reversal bill to pass by week’s end

A bill that would cancel the IRS reporting rule for DeFi platforms is expected to reach President Trump by Friday for his signature, according to Crypto In America. The Senate is preparing to take a second and final vote on the bill Thursday, and if it passes again, Trump is likely to sign it into law the very next day.

The rule, known as the DeFi broker rule, was pushed through during the last days of the Biden administration. It forces decentralized crypto platforms to report user activity to the IRS the same way traditional brokers do.

Critics say that doesn’t make sense for systems that don’t actually hold user funds or run trades. The rule’s opponents say it would damage innovation and force devs to either break the law or leave the country.

Senate prepares second vote before bill lands on Trump’s desk

The Senate already passed the bill once, on March 4, with a 70–27 vote. That’s more than two-thirds, so it qualifies as a bipartisan supermajority. But under the Constitution’s origination clause, budget-related legislation must start in the House. So even though the Senate voted first, it has to do it again now that the House signed off. The House passed the same Congressional Review Act (CRA) resolution on March 11 by a 292–132 vote.

Ted Cruz, the Republican senator from Texas who introduced the bill, called the Senate vote earlier this month “a victory for American innovation.” His bill blocks the IRS from enforcing its reporting mandate against DeFi protocols. Cruz wants to make sure software developers and permissionless platforms don’t get lumped in with centralized entities.

The same exact bill is going through the Senate again on Thursday. If it passes, President Trump is expected to sign it into law on Friday. That would make it the first crypto-related bill ever signed into U.S. law. The CRA mechanism allows Congress to overturn recent federal rules, and this one targets the IRS rule directly.

But that’s not the only battle going on in D.C. On Wednesday morning, over 30 crypto companies signed a joint letter demanding Congress rein in the Department of Justice. They say the DOJ is using vague money transmission laws to go after DeFi developers who don’t even touch user funds.

The letter was organized by the DeFi Education Fund, a D.C.-based group that works on policy issues affecting decentralized finance. The letter went to the top members of the Senate Banking and Judiciary Committees, along with the House Financial Services and Judiciary Committees. It was signed by Coinbase, Kraken, A16z, Paradigm, Multicoin Capital, Exodus, and Ledger, among others.

The industry is angry about how the DOJ is interpreting Section 1960 of the criminal code. That law makes it a crime to run an unlicensed money transmission business. But the DOJ wants to use it on DeFi platforms—even ones where devs don’t hold or transfer funds. The companies behind the letter say that interpretation is too broad and could lead to charges against people just writing code.

The group is also accusing the DOJ of ignoring FinCEN’s 2019 guidance, which clearly stated that developers are not money transmitters. The current DOJ stance not only creates legal risks, but it also contradicts what FinCEN already said years ago. Industry leaders want Congress to fix this fast before any more devs get caught up in it.

Developers raise alarms after DOJ charges Tornado Cash co-founder

One of the main reasons the letter dropped this week is the ongoing case against Roman Storm, a co-creator of the crypto mixer Tornado Cash. In August 2023, the DOJ charged Roman with running an unlicensed money transmission business and helping launder money. It was the first time federal prosecutors hit a DeFi dev with criminal charges.

The case shocked the crypto world. Roman didn’t hold funds, didn’t manage transactions, and wasn’t running a company. But the DOJ still charged him, saying that by writing code and deploying a tool others used to hide money, he was just as guilty.

That move set off alarms across the crypto community. Many fear it opens the door to what the DeFi Education Fund calls “regulation by criminal indictment.” In other words, rather than writing new laws or regulations, the government is just charging devs under existing laws that were never meant for decentralized code.

Amanda Tuminelli, who leads the DeFi Education Fund as Executive Director and Chief Legal Officer, said the group’s “number one policy priority is obtaining Congressional clarity on Section 1960.” Amanda also thanked the companies backing the letter, saying they all came together to “defend the rights of software developers and to push back on the DOJ’s misguided approach.”

Members of Amanda’s team are meeting with lawmakers on Capitol Hill this week to talk about the issue in person. They want clear legal lines drawn between developers who write open-source code and centralized entities that move money for others. Without that clarity, they say, any dev working on a DeFi tool could be at risk.

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