The outgoing US administration doesn’t want to leave quietly! The US tax agency has introduced new rules for DeFi platforms. According to the IRS, DeFi services must comply with regulations established by the tax agency and accept broker-dealer status. The new ruling imposes the same reporting requirements on decentralized exchanges as those applied to traditional brokers.
The platforms that fail to comply may face access blocks for US users. Alternatively, these services might have to forgo smart contract upgrades and revenue generation. The rule is scheduled to take effect in 2027.
Clients of DeFi platforms will have to share KYC similar to what is mandated at traditional exchanges. It will also necessitate the use of specialized crypto tax software to track all transactions.
The crypto industry has reacted negatively to this news describing this move as government overreach. Industry representatives have called on Congress to block the regulation.
Uniswap CEO Hayden Adams hopes the regulation will either be rejected or fail to withstand legal scrutiny.
Robin Singh, CEO of crypto tax platform Koinly, notes the law requires operational and technical innovation for DeFi businesses.
Consensys lawyer Bill Hughes highlighted that the DeFi platforms don’t have centralized structures used for traditional reporting, hence, this creates significant obstacles for companies. He suggested that this difficulty was deliberately created by the outgoing administration to cause additional problems for the crypto industry—a sentiment I fully agree with.
The ruling also requires global platforms to track and report user activity to the US government, covering both US and foreign users. Starting in 2027, platforms must provide data on all digital asset transactions. This is an outrageous demand, but after everything the industry has endured so far, it’s no longer surprising.