Trump signed its first encrypted currency legislation on Thursday — a bipartisanly supported bill that repealed the IRS regulations issued at the end of the Biden administration.
The provision classifies websites and wallets that allow users to exchange encrypted money as brokers. Although not including the Decentralisation Financial (DeFi) Agreement itself, this provision would have covered the website of the Centralized Exchange such as MetaMask, a popular, encrypted currency wallet or Uniswap.
Under the repealed provisions, decentrized applications (DeFi) and wallets need to start collecting a large amount of customer data to prevent tax evasion and help clients report taxes to IRS.
According to a Republican congressman in Ohio, Mike Cary, this was the first special bill to be signed into law.
In a statement, Cary stated: “The Decentralised Financial Brokers Rules unnecessarily impede innovation in the United States, violate the privacy of ordinary Americans, and overburden IRS during the tax season because its infrastructure is unable to handle new declarations.”
The rule was originally to enter into force in 2027.
When originally proposed, it even covered the decentrization of the financial agreement itself, triggering strong opposition from the industry.
The officials eventually issued a more relaxed version, which only applies to front-end services.
However, encrypted money developers and lawyers warned that this could pose a existential threat to de-centre finance, a block-based financial software designed to eliminate intermediaries such as banks.
As of Tuesday, more than $114 billion in encrypted money had been deposited in thousands of decentralised financial agreements tracked by DefiLlama.
Most of the encrypted money is deposited through user-friendly websites and applications (i.e., front-end services), which enable people with less technical knowledge to use decentrized financial agreements.
Some Democrats warned that the bill would facilitate tax evasion.
At a hearing in February, MP Richard Neil of the Massachusetts Democratic Party said: “The bill before us today will repeal the important legislation of the Treasury to ensure that taxpayers meet their tax reporting obligations so that they cannot circumvent the law by selling encrypted money without reporting on the proceeds.”
Neil added that the abolition would cost the United States Government $4 billion.
However, the bill was successfully passed through Congress, with the support of the majority of Republicans and dozens of Democrats.
“This bipartisan initiative underscores our commitment to promoting innovation and ensuring that Americans retain the freedom to choose how to trade.”