GuShiio.com Policy loosening is frequent, is the spring of encryption coming?
Written by: Ashley
After Trump entered the White House, favorable policies in the encryption market have been frequently heard. On March 4, U.S. local time, the Senate voted 70 – 27 to revoke the DeFi Broker Rule. David Sacks, White House director of AI and cryptocurrency, posted on social platforms,”The White House is pleased to announce support for the Congressional Review Act (CRA) proposed by Senator Ted Cruz and Congressman Mike Carey to repeal the so-called” DeFi Broker Rule,”a last-minute attack on the crypto community by the Biden administration.”
However, the resolution still needs to be passed by the House of Representatives, after which U.S. President Trump can sign it into law. Once completed, not only will the rule be completely repealed, but the IRS will also be prohibited from implementing similar policies in the future. The White House said the president may sign the resolution quickly.
The blockchain association, which represents well-known cryptocurrency companies such as Coinbase, Kraken and Uniswap Labs, supports repealing the rule and says it will avoid imposing unnecessary restrictions on DeFi innovation. The DeFi Education Fund said the Senate vote was “the first of many historic milestones in the regulation of digital assets in the United States.”
Why revoke the DeFi Broker Rule?
The DeFi Broker Rule is a regulatory framework for decentralized financial (DeFi) intermediary service providers (such as trading platforms, lending agreements, etc.) that will be implemented on January 1, 2025 and is designed to ensure compliance, user protection and risk management. The core content includes anti-money laundering (AML), user identity verification (KYC), smart contract auditing, fund security and transparency requirements. According to TaxDAO’s professional interpretation, this rule has a certain positive effect on anti-money laundering, anti-terrorism, and anti-tax evasion.
In fact, the DeFi broker rule caused a lot of controversy in the industry before it was implemented. Because decentralized platforms do not hold funds or store customer data like traditional financial institutions, many critics believe the rule is unrealistic and a form of “over-regulation.” Digital assets think tank Coin Center called the proposal “technically not feasible.”
The main reason is that the DeFi Broker Rules attempt to follow the TradFi approach to supervise DeFi, fail to comply with the development logic and characteristics of Crypto, ignore the decentralization and anonymity of DeFi, and fundamentally misunderstand the technology it is trying to supervise. The DeFi Broker Rules put forward higher requirements for compliance management, requiring practitioners to strictly perform their tax declaration obligations and enforce the KYC mechanism. Take the Form 1099-DA filling specifications as an example. This regulation clearly requires brokers to submit digital wallet addresses and transaction volumes including investors. This regulatory measure will substantially change the existing transaction model: on the one hand, the KYC mechanism will lose the anonymity of DeFi. Characteristics, resulting in a significant reduction in the level of privacy protection; on the other hand, the collection, processing and reporting process of user data will greatly increase operating costs and compliance pressure.
Senator Ted Cruz, the initiator of the repeal of the DeFi broker rule, said in a Senate speech before the vote: “DeFi is a microcosm of the cryptocurrency revolution.” He called the rule “inconsistent” federal overreach. He argued that rules that treat software developers as brokers (and force them to disclose user data and personal information) were meaningless,”their software never held or controlled user funds.”
Michele Korver, head of supervision of a16z Crypto, also issued a document saying that the new broker reporting rules released by the U.S. Treasury Department yesterday pose a direct threat to DeFi’s development vision and may hinder the future of DeFi’s innovation in the United States. To this end, a16z Crypto supported the Blockchain Association, DeFi Education Fund, and Texas Blockchain Council in filing a lawsuit alleging that the U.S. Department of Taxation and the Treasury Department exceeded their legal authority, violated the Administrative Procedure Act (APA), or even unconstitutional.
DeFi bears the brunt of “crypto deregulation” under Trump
This proposal was passed with an overwhelming victory of 70 votes to 27, indicating that not only the Republican Party, but also the Democratic Party, there are many people who support the development of Crypto. A similar situation occurred in the last Congress vote to abolish the SEC’s cryptocurrency accounting rules, indicating that the support of the two parties for the development of Crypto continues to increase, continuing the trend of cooperation on cryptocurrency legislation, and may contribute to this year’s stablecoin legislation and other crypto bills bring benefits.
With Trump coming to power again, the U.S. Congress, the most pro-cryptocurrency in history, was born. Although many people were disappointed by the presidential currency, lady currency, and the market prices after Trump issued a document again emphasizing “cryptocurrency strategic reserves” in the past two days, it is undeniable that the policy change is indeed beneficial to the crypto market. On the third day after returning to the White House, on January 23, 2025, Trump signed an executive order to establish a cryptocurrency working group. The tasks include proposing new digital asset supervision recommendations and exploring the establishment of a national cryptocurrency reserve. The order explicitly prohibits the creation of Central Bank digital currencies (CBDCs) in the United States, preventing government-issued digital currencies from competing with existing cryptocurrencies.
As the core component of the crypto world, DeFi was the first to become the target of pressure and jurisdiction by regulatory agencies such as the SEC in its early years. However, there have been frequent positive signals from various regulations in the DeFi field recently, and it is not difficult to see that the attitude of regulators has indeed changed. The SEC announced the withdrawal of Kraken’s lawsuit; closed the investigation into Gemini; terminated the three-year investigation into Uniswap Labs without taking any enforcement action; two market makers, Wintermute and Citadel Securities, began to enter the U.S. market;Tornado Cash founder Alexey Pertsev was temporarily released…
In addition, the SEC withdrew accounting guidance that required listed companies to record third-party crypto assets as assets and liabilities at the same time, and announced the establishment of a crypto task force to develop a comprehensive and clear regulatory framework. It also said it would reduce crypto enforcement efforts and reassign More than 50 full-time lawyers and staff to reduce industry regulatory pressure. In addition, last month, the SEC confirmed crypto ETF applications filed by several traditional American giants, and withdrew lawsuits and investigations into cryptocurrency projects such as Coinbase, Robinhood, and Uniswap. These measures indicate that the SEC’s attitude towards crypto assets is shifting from “strong regulation” to “friendly”.
In the future, under the relaxed regulatory policy environment represented by the revocation of the “DeFi Broker Rules”, the encryption market may usher in more than just good things. In a loose regulatory environment, how to crack down on illegal activities such as money laundering, and how to ensure tax fairness and market order? Against the background of the rapid development of the encryption industry, how to find a balance between encouraging innovation and strengthening supervision? How will this “crypto president” fulfill the United States ‘promise to become the world’s crypto capital? All of this also requires answers to be formed through the continuous exploration and integration of the encryption market and regulatory policies.
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