The U.S. Treasury Department has abolished the IRS reporting rules for DeFi platforms, marking a significant compliance victory for the industry.

On July 10, 2025, the U.S. Department of the Treasury announced the formal repeal of the controversial Biden-era "IRS Reporting Rules," a decision that brings significant breakthroughs in compliance for DeFi platforms. Previously, this rule introduced by the Biden administration required DeFi platforms to provide Form 1099-DA reports for all user transactions, which had been widely criticized.

DeFi platform victory: IRS reporting rule repeal

The repeal of this rule stems from legislative action by the U.S. Congress. Earlier in 2023, the U.S. Congress passed the Congressional Review Act, which repealed this regulation, and President Donald Trump signed the bill in April. Supporters of DeFi in Congress argued that this regulation would burden DeFi platforms and contradict the principles of decentralization.

How do the new IRS reporting rules work?

According to the new regulations, DeFi platforms are no longer required to comply with the compliance requirements in the IRS reporting rules, including "Know Your Customer" (KYC) rules and trading reporting obligations. Through the mechanism of the Congressional Review Act, it ensures that the IRS cannot issue similar regulations in the future unless granted special authorization by Congress.

However, this repeal only applies to non-custodial DeFi applications. Centralized exchanges are still required to provide Form 1099-DA to the IRS. In addition, all DeFi users still need to voluntarily report their gains and losses to the IRS and independently track their trading activities, as the IRS will no longer receive automatic trading data.

Impact and Outlook on the Decentralized Finance industry

The DeFi industry sees this repeal as a significant victory. For example, the CEO of the DeFi Education Fund, Miller Whitehouse-Levine, stated that this rule infringes on user privacy and could potentially undermine the potential for DeFi innovation. Other experts have also warned that overly cumbersome regulations could drive DeFi innovation overseas.

DeFi protocols are a type of decentralized software protocol that can theoretically operate independently, usually without legal entities representing them, which makes them face challenges in complying with regulatory and reporting requirements. However, there are also some centralized projects that use the name DeFi for marketing.