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The US House Committee voted 26-16 on February 25, 2025, to remove the IRS rule that imposes taxes on transactions involving decentralized finance (DeFi).
The move comes at a time when the entire US administration has taken a rather soft stance on crypto. With SEC dropping probes on many crypto, deFi, and blockchain firms, and crypto personals getting pardoned, the entire sector has seen a change shift in outlook ever since pro-crypto people have taken office.
Market Reaction to The New IRS Rule Repeal
The DeFi community views the vote as a major victory and anticipates that it will result in a more hospitable regulatory climate for blockchain and cryptocurrency operations.
Previously, industry executives and proponents of DeFi had criticized the rule, which sought to levy fees on DeFi activities, claiming that it would hinder innovation and make it more difficult for users to engage in decentralized financial ecosystems.
The repeal’s proponents contend that the existing tax code was antiquated and unsuitable for the quickly changing DeFi market.
This ruling shows that Congress is becoming more conscious of the need to update tax laws to take advantage of new technologies like DeFi.
Also Read: US SEC Dismisses Quest to Regulate DeFi Market, What’s Next For The Industry?
IRS Tax Rule for DeFi: What Did it Include?
In an attempt to control the expanding cryptocurrency industry and guarantee tax compliance, the IRS attempted to levy taxes on decentralized finance (DeFi) transactions.
Without the need for middlemen, DeFi platforms enable users to borrow, lend, and exchange bitcoins, resulting in intricate financial transactions that the IRS feels ought to be taxable.
By considering these activities to be taxable events akin to conventional financial transactions, the regulation sought to capture gains from them.
The IRS aimed to combat tax evasion and narrow possible tax loopholes by taxing DeFi transactions, which ensured that people and companies in the DeFi area reported their earnings. Critics countered that the rule ignored DeFi’s particular characteristics and was unduly general.
New Move Comes as US Takes More Accepting Stance Towards Crypto
The U.S. has steadily grown more tolerant of the blockchain, DeFi, and cryptocurrency sectors since Trump took office. Although there was initially some regulatory ambiguity, efforts to create precise rules for digital assets have accelerated.
More pro-innovation positions resulted from the government and lawmakers’ growing understanding of blockchain technology’s potential for financial institutions.
Growing interest is reflected in significant actions like the formation of the “Blockchain Caucus” and the regulatory frameworks for digital assets.
With the U.S. increasingly emerging as a center for blockchain and crypto-related businesses, the government’s strategy currently centers on promoting investment and striking a balance between innovation and security.
Also Read: Chainlink Introduces DeFi Yield Index To Enhance Market Transparency And Capital Efficiency