President Donald Trump signed a pivotal piece of legislation on April 11, 2025, that effectively repealed an IRS rule expanding the definition of “broker” to include decentralized finance (DeFi) platforms. The repeal marks a significant shift in how the U.S. government views crypto regulation under the new administration. Trump’s decision aligns with his vocal support for cryptocurrency and sets a tone of deregulation that many in the digital asset industry consider long overdue.
The Controversial IRS Rule
In 2021, the IRS introduced a rule that sought to classify a wide array of entities involved in digital asset transactions as “brokers.” This rule included decentralized exchanges (DEXs), protocol developers, and even wallet providers. The IRS intended to bring more transparency to the crypto space and increase tax compliance. However, critics argued that the rule was overly broad and technically unfeasible.
DeFi platforms, by design, operate without a central authority. They use smart contracts to execute transactions and maintain user anonymity. These platforms don’t collect user information or control data flow, which made it virtually impossible for them to comply with the rule. Many developers feared legal repercussions and considered relocating outside the United States.
Trump’s Rationale
Trump built his 2024 campaign on promises to unleash innovation and eliminate red tape. He criticized previous administrations for stifling technological progress through what he described as “heavy-handed bureaucracy.” In repealing the IRS rule, Trump claimed he aimed to protect American entrepreneurs and ensure that the U.S. remains competitive in the blockchain sector.
At the signing ceremony, Trump stated, “We will not let outdated government rules crush the next generation of internet technology. DeFi is not the enemy—it’s the future. And America will lead that future, not run from it.”
The decision received immediate applause from several pro-crypto lawmakers, including Senator Cynthia Lummis and Congressman Tom Emmer. They had long argued that the IRS rule would have forced DeFi developers to either shut down or leave the country.
Industry Response
The crypto community wasted no time celebrating the repeal. Leaders from major blockchain projects took to social media to express their relief and support. Hayden Adams, founder of Uniswap, tweeted, “This is a big win for DeFi and for America. The innovation doesn’t need to happen overseas. With smart policy, it can happen right here.”
Coinbase CEO Brian Armstrong also praised the move. He emphasized that clarity and fairness, not overreach, should guide crypto policy. “We support responsible regulation, but this IRS rule missed the mark. It demanded the impossible from decentralized systems,” Armstrong wrote.
Crypto developers, investors, and financial analysts all echoed a similar sentiment. They viewed the repeal not only as a regulatory rollback but also as a statement of support from the federal government. The move signaled a sharp contrast from the enforcement-heavy approach of the Biden administration, which had aggressively pursued compliance actions against crypto platforms.
Legal and Economic Implications
Trump’s repeal changes the legal landscape for DeFi platforms in the U.S. Prior to the repeal, developers operated in a legal gray area. Many feared penalties for failing to meet impossible reporting standards. With the rule off the books, developers can now focus on building without fear of prosecution.
However, the repeal also opens the door to questions about tax compliance. Without reporting mandates, the IRS will face challenges tracking crypto gains. Analysts warn that tax evasion in the digital asset space could rise, especially if regulators do not introduce alternative mechanisms for oversight.
Despite these concerns, market analysts see long-term benefits. The repeal may encourage more DeFi innovation in the U.S., attract talent, and reduce capital flight. VC firms had previously warned that U.S.-based crypto startups were losing their competitive edge to countries with friendlier regulations. With this repeal, the tide could shift back.
Political Reactions
Not everyone supports the repeal. Democratic lawmakers immediately criticized the decision, calling it a gift to tax evaders and cybercriminals. Senator Elizabeth Warren stated, “This is a step backward. We cannot let crypto become the wild west of finance. The American people deserve financial transparency and accountability.”
Warren and other Democratic senators plan to introduce alternative legislation that reinstates reporting requirements, but with exemptions for decentralized systems. They aim to strike a balance between enforcement and innovation.
Meanwhile, Trump’s political allies have defended the move as necessary deregulation. House Majority Leader Steve Scalise said, “This rule never made sense. It asked software developers to do the impossible. We’re cleaning up the mess and making room for the next generation of tech leaders.”
Impact on Global Crypto Policy
Trump’s decision could influence other nations considering similar regulations. Countries like the U.K., Japan, and Australia have debated how to regulate DeFi without stifling innovation. The U.S., as a global leader in tech and finance, often sets the tone for global policy.
With this repeal, other governments may take a closer look at how to regulate DeFi more effectively. If the U.S. sees a surge in DeFi innovation, other nations might choose a lighter regulatory touch to remain competitive.
Market Reaction
The repeal triggered immediate positive movement in crypto markets. Ethereum, which underpins most DeFi protocols, rose 4% within hours of the announcement. DeFi tokens like Uniswap (UNI), Aave (AAVE), and Compound (COMP) all saw double-digit gains.
Investors interpreted the news as a green light for U.S.-based development. Crypto venture funds announced new investments in DeFi infrastructure, while several projects that had previously stalled due to regulatory concerns announced plans to relaunch.
The Road Ahead
While the repeal brings short-term relief and optimism, the long-term outlook remains complex. Regulators will need to revisit how they approach decentralized systems. The IRS must still find ways to ensure tax compliance without disrupting innovation.
Policymakers may explore new frameworks that rely on voluntary compliance, cryptographic audits, or blockchain analytics tools. DeFi, after all, offers transparency in code and transaction history—even if it doesn’t fit traditional models of oversight.
Ultimately, Trump’s repeal of the IRS rule represents more than just a legal change. It signals a philosophical shift toward embracing decentralized technology. The administration has placed its bet on innovation and trust in the private sector. Whether this gamble pays off will depend on how the industry responds—and whether it can self-regulate without inviting new waves of fraud and abuse.
