The decentralized finance (DEFI) industry is stunning when Congress relaxes its reporting obligations, but questions about how lawmakers will regulate Didi.
On March 12, the House voted to invalidate a rule that requires reporting to the IRS the total revenue from cryptocurrency sales and the total income related to taxpayers.
The IRS issued rules in December 2024 do not take effect until 2027, Believed The main industry lobby as a heavy group is beyond the authority of the institution.
The White House has Signs support for its statement. President Donald Trump is ready to sign when he arrives at the table. But DEFI observers point out that the industry has not yet reached a balance between privacy and regulation.
Both parties vote on the abolition of the rules. source: Defi Education Fund
Privacy Issues in IRS DEFI Rules
The cryptocurrency industry quickly praised the House vote. Marta Belcher, chairman of the Filecoin Foundation, said blocking the rule is particularly important for user privacy.
“It is crucial to protect people’s ability to trade directly through open source code, such as smart contracts and decentralized exchanges, while remaining anonymous, just like how people can trade directly with cash,” she told Cointelegraph.
Privacy issues are at the heart of the cryptocurrency industry’s objection to the rule, with industry observers claiming it is not suitable for purpose and infringe upon user privacy.
Bill Hughes, Senior Consultant and Director of Global Regulatory Affairs Consensys Software Write In December 2024, “The transaction front end will have to track and report user activity – both Americans and non-Americans (…) are suitable for the sale of every digital asset – including NFTS, and even StableCoins.”
The Blockchain Association is a major crypto industry hall group, statement The rule is “using decentralized technology to infringe on individual privacy rights”, which will push away from near-shore conditions.
Although the rule has been stopped, fixed privacy guidelines have not been established – Etherealize CEO Vivek Raman said the industry needs to move forward.
“While maintaining (understanding your customers/anti-monetary money laundering) requirements, there is a need for a clear blockchain-based privacy framework,” he told Cointelegraph.
Raman said some transactions and customer data will need to be kept private, “We need guidance on what privacy will be.”
How do you adjust Defi?
The crypto space has long challenged user privacy needs and regulators’ anti-money laundering and understand your customer concerns.
One problem is the technology itself – if many networks are created by many people and are not controlled by a single entity, who can the government contact?
Per Raman, “It’s hard to have a decentralized agreement that no one controls the 1099s or fulfills the responsibilities of broker traders! The company can certainly be (broker traders), but there is no software designed for (broker traders) rules.”
Defi developers can and have actively worked with regulators to link analytics suggestionlike some agreements following the catastrophic $285 million Kukon hacker crime, the same is true of the freeze.
Related: Timetable: How Bybit’s Lost Ethereum Through North Korea’s Washing Machine
Cinneamhain Ventures Partner and Consultant Adam Cochran claim Each protocol has a certain pressure point regulator, and if you commit a crime with a protocol, you can move on:
source: Adam Cochran
However, these specific examples do not become a comprehensive regulatory framework that industries and investor protection agencies can point to.
In this regard, crypto analysis company chain analysis statement In 2020, regulators may need to enact regulations on the Defi space, taking into account decentralized reporting restrictions.
Raman suggests that a possible solution might be zero-knowledge proof, which allows users to confirm certain data without revealing it.
He is optimistic about the regulator’s ability to find a kind of ability to regulate the space while still maintaining user privacy: “I think we’ll see a positive sum environment where defi and compliance will coexist.”
The long-awaited crypto regulatory framework
Trump has made many pro-Creputo measures by executing orders and appointing pro-Creputo individuals to lead part of his administration, the latest being to build strategic bitcoin reserves.
Related: Byron Donalds
The pro-Claputo term of key financial regulators such as the important financial regulators (SEC and SEC) and the Commodity Futures Trading Commission (CFTC) has revoked many of the highly-reviewed law enforcement cases against cryptocurrency companies.
While it is worth noting that the big fish that the cryptocurrency industry is waiting for is the crypto regulatory framework and the stability bill radiated by Congress, which will give the industry the guardrail it claims needs to thrive.
March 13, Senate Banking Committee Officially recognized The Genius Act, the Stability Act, took it one step closer to the Senate vote.
Fit 21’s crypto framework bill was first proposed in the 2024 legislative session and eventually failed in the Senate. But in February, House Financial Services Committee Chairman France Hill said he expected The bill could be adopted in this session by “moderate changes.”
But even if Fit 21 is passed quickly, Defi’s regulations may be out of reach. The bill will exclude DEFI is conducted from the supervision of the SEC and CFTC, but it will also establish a working group to study 12 key areas related to DEFI.
This study will seek to understand the risks and benefits of Defi and ultimately make regulatory recommendations.
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