A coalition of major cryptocurrency firms, including Coinbase, Andreessen Horowitz (a16z), Paradigm, Kraken, and Uniswap, has signed a letter urging the US Congress to overturn a recently finalized Internal Revenue Service (IRS) rule that imposes stringent reporting requirements on DeFi (decentralized finance) brokers.

The letter, dated February 19, 2025, was addressed to congressional leaders, including Senate Majority Leader John Thune, Senate Minority Leader Chuck Schumer, House Speaker Mike Johnson, and House Minority Leader Hakeem Jeffries. 

It calls for support of Senator Ted Cruz’s Congressional Review Act resolution (S.J.Res.3), which seeks to repeal the IRS rule expanding the definition of “broker” to include software developers and infrastructure providers in the DeFi space.

The IRS rule, finalized in the last days of the Biden administration, broadens the classification of brokers to include entities that facilitate DeFi transactions, even if they do not custody user funds. 

Under this regulation, software developers and DeFi service providers would be required to collect and report personal information and transaction data of users—something the industry argues is both impractical and harmful to privacy.

The signatories argue that the rule misclassifies technology providers as financial intermediaries, imposing excessive compliance burdens that the IRS itself estimates would increase the US government's paperwork load by one-third. 

They warn that the regulation jeopardizes financial privacy by forcing DeFi platforms to store and report sensitive user data. Another major concern is that the rule only applies to U.S.-based DeFi services, putting American firms at a competitive disadvantage, while foreign competitors remain free from such restrictions.

The crypto industry asserts that such sweeping regulatory changes should be made by Congress, not through last-minute rulemaking by federal agencies. They claim the IRS rule threatens US leadership in blockchain innovation and risks pushing businesses and entrepreneurs overseas. 

The letter emphasizes the need for a regulatory environment that fosters growth rather than stifles it, arguing that excessive reporting requirements could cripple DeFi innovation within the United States.

Senator Ted Cruz’s resolution under the Congressional Review Act (CRA) provides a legal mechanism for overturning newly finalized federal regulations. If Congress votes in favor, the rule will be repealed before it can take effect.