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How much impact will Trump's reversal of the IRS rules have on the crypto space?
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The Biden Treasury Department's last-minute extension of the rules to DeFi was seen as executive overreach without congressional approval. Trump's AI and crypto chief David Sacks unceremoniously called it a midnight regulation, saying it would stifle American innovation, raise privacy concerns, and impose unprecedented compliance burdens on American DeFi companies.
Treasury Secretary Scott Bessent expressed plans to revoke and amend relevant crypto tax rules at the recent White House Digital Asset Summit.
The most important feature of this reversal is the bipartisan nature of its victory. When Republicans joined dozens of Democrats in voting to overturn the Democratic administration’s rules, it revealed a shift in the political importance of cryptocurrencies and the fact that financial technology innovation deserves room to grow. This marked a significant shift from the SEC era under Gary Gensler, when Democratic leadership largely supported aggressive enforcement actions against crypto companies. Even Senate Minority Leader Chuck Schumer broke with his party’s leadership to support the measure, a political calculus that speaks volumes about the growing importance of cryptocurrencies in elections. Industry groups that once struggled to gain recognition have now become influential voices.
The Blockchain Association and the DeFi Education Fund led an aggressive lobbying effort that successfully flipped the Democratic vote, ultimately securing a majority sufficient to override a veto. Their success shows how quickly cryptocurrency advocacy has matured, with outreach efforts to key lawmakers focused on specific policy issues rather than general blockchain education. When the Biden administration introduced the rule, the Blockchain Association promised to take aggressive action. And they delivered. Four months after filing the lawsuit, the Association is now celebrating the repeal of the rule that threatened to end the U.S. crypto industry.
Trump's signing of this resolution is a breakthrough in resolving the core contradiction of crypto regulation, which has plagued the industry since day one, the collision of industrial-era regulatory frameworks and digital-native financial systems. This victory shows that Washington has finally acknowledged that forcing decentralized systems to adapt to centralized regulatory frameworks will not work. Innovation requires appropriate guardrails, not retrofitted barriers.
Innovation occurs
Problems emerge
