01/04/2025
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Crypto Tax Repeal Vote, Ethereum’s Pectra Progress

editor06 mins

The Senate’s Move to Repeal the IRS Crypto Rule: A Sea Change in Crypto Taxation

Introduction

In a significant turn of events, the U.S. Senate recently voted to repeal a contentious crypto tax rule finalized by the Internal Revenue Service (IRS) in late 2020. This move, which passed with a substantial bipartisan majority, has the potential to reshape the landscape of crypto taxation and could be a game changer for the cryptocurrency community. Let’s delve into the details of this development and explore its implications.

The Contentious IRS Crypto Tax Rule

The IRS rule in question, finalized in December 2020, required crypto brokers to report gross proceeds from crypto transactions to the IRS. This meant that every time a crypto asset was sold, the broker would have to report the total sale amount, regardless of whether it represented a gain or loss. This rule was criticized for several reasons:

  • Burden on Brokers: The rule placed a significant administrative burden on brokers, who would now have to track and report every single crypto transaction, regardless of its nature.
  • Chilling Effect on Innovation: Critics argued that this rule could stifle innovation in the crypto space, as it would make it more difficult and costly for new players to enter the market.
  • Overreporting of Income: The rule required the reporting of gross proceeds, not net gains. This meant that if a user bought and sold a crypto asset multiple times in a year, they could end up reporting more income than they actually made.

    • The Senate’s Decision

    On March 27, 2025, the Senate voted 70-28 to approve a resolution that cancels the IRS rule targeting decentralized finance (DeFi) platforms. The resolution, introduced by Senator Mike Lee (R-UT) and Senator Pat Toomey (R-PA), had bipartisan support. The bill will now be sent to President Trump for his signature.

    Implications for the Crypto Community

    The repeal of the IRS crypto rule is a major victory for the crypto community. Here’s why:

  • Reduced Burden on Brokers: The repeal of this rule will significantly reduce the administrative burden on brokers, making it easier for them to operate in the crypto space.
  • Encouraging Innovation: By removing this regulatory hurdle, the repeal could encourage further innovation in the crypto industry.
  • Fairer Taxation: The repeal of the rule could lead to fairer taxation, as it will no longer require the overreporting of income.

    • Impact on Crypto Taxation

    The repeal of the IRS crypto rule could have a significant impact on crypto taxation:

  • Easier Compliance: Without the rule, crypto investors will find it easier to accurately report their crypto-related income to the IRS.
  • Potential Increase in Tax Revenue: If more crypto investors accurately report their income, this could lead to increased tax revenue for the government.

    • Looking Ahead

    While the repeal of the IRS crypto rule is a positive development, it’s not the end of the story. The crypto industry will continue to face regulatory challenges, and it will be important for the industry to work with regulators to ensure that regulations are fair, reasonable, and do not stifle innovation.

    Conclusion: A Sea Change

    The Senate’s move to repeal the IRS crypto rule is more than just a victory for the crypto community; it’s a sea change in crypto taxation. It removes a significant regulatory hurdle that could have hindered the growth and development of the crypto industry. The repeal of the rule could also make it easier for crypto investors to comply with their tax obligations, which could lead to increased tax revenue for the government. As the crypto industry continues to grow and evolve, it will be crucial for the industry to engage with regulators to ensure that regulations support, rather than hinder, innovation.

    Sources:

    – Axios
    – The Block
    – The Block
    – Muck Rack
    – Mitrade
    – Decrypt
    – PANews
    – Coinbase
    – Bloomberg Law
    – [CoinGecko](https://www.coingecko.com/en/coins/w

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