According to Cointelegraph, the new rule of the U.S. Internal Revenue Service (IRS) that regards decentralized finance (DeFi) front ends as brokers has caused a shock in the crypto industry. Alex Thorn, head of research at Galaxy Digital, pointed out that if the IRS does not withdraw the rule, DeFi has three options for response.
Thorn said DeFi services can choose to comply with IRS reporting requirements and accept broker-dealer status, try to block access for U.S. users, or give up smart contract upgrades and revenue generation. Extremely decentralized applications may not be affected by this regulation.
The IRS issued a final rule change on December 27, 2024, scheduled to take effect in 2027. Crypto industry executives called on Congress to block the regulation, calling it an overreach of government. Organizations such as the Texas Blockchain Committee have filed a joint lawsuit against the IRS, alleging that its actions are illegal and unconstitutional.