Galaxy Digital Research Director Alex Thorn stated that if the IRS's designation of the DeFi front end as brokers is not revoked, the DeFi industry will face three options: comply with the IRS reporting requirements and accept the broker designation, try to block users from the U.S., or abandon smart contract upgrades and revenue generation.
According to a report yesterday, the IRS released final regulations requiring brokers to report digital asset transactions, incorporating DeFi platforms into the existing tax framework. The rule will take effect in 2027 and will require brokers to disclose transaction details, including total revenue and taxpayer information. Brokers must start collecting and reporting data from 2026. The IRS estimates that between 650 to 875 DeFi brokers will be affected, potentially impacting up to 2.6 million taxpayers. These regulations mainly target 'front-end service providers' that facilitate digital asset trading, such as DEXs. According to the IRS, classifying these platforms as brokers will help ensure tax compliance.