Regulatory document: https://public-inspection.federalregister.gov/2024-30496.pdf
The U.S. Treasury and the IRS recently issued an important new regulation (RIN 1545-BR39) that extends the application of existing tax laws to include DeFi front-end service providers in the definition of 'broker'. These service providers, including any platforms that interact directly with users (such as Uniswap's front-end interface), are required to collect user transaction data starting in 2026 and submit information to the IRS via Form 1099 starting in 2027, including users' total earnings, transaction details, and taxpayer identity information.
We all know that Trump's political stage is never short of drama, and his attitude towards cryptocurrency is even more so. From early criticism of Bitcoin, calling it a 'scam based on air', to later attempts through NFT projects, issuing the DeFi project WorldLibertyFinancial (WLF), and boldly proposing to include Bitcoin in the national strategic reserves (from America's historically successful strategic land acquisitions to the forward-looking idea of Bitcoin reserves: the Bitcoin Strategic Reserve Draft of 2025), his actions reflect personal interest-driven motives and also imply the complex position of the crypto industry within the U.S. political system.
Although the new regulations will not take effect for another year or two, and there are significant controversies regarding the definition of 'broker', the old regulatory policies cannot be rigidly applied to crypto projects. Therefore, there is a possibility that they could be overturned. However, Aiying would like to discuss today the historical inevitability of the new regulations from several dimensions, as well as how industry practitioners should make strategic choices.
Part One: The Logical Evolution from Traditional Colonialism to New Financial Colonialism
1.1 The Resource Logic of Traditional Colonialism
The core of traditional colonialism lies in resource plunder achieved through military power and territorial occupation. The British controlled cotton and tea in India through the East India Company, and Spain plundered gold from Latin America; these are typical cases of wealth transfer achieved through direct resource possession.
1.2 The Modern Model of Financial Colonialism
Modern colonialism is centered around economic rules, achieving wealth transfer through capital flows and tax control. The U.S. Foreign Account Tax Compliance Act (FATCA) is an important embodiment of this logic, requiring global financial institutions to disclose asset information of U.S. citizens, forcing other countries to participate in U.S. tax governance. The new DeFi tax regulations are a continuation of this model in the digital asset space, focusing on using technological means and rules to enforce global capital transparency, allowing the U.S. to acquire more tax revenue while enhancing its control over the global economy.
Part Two: America's New Colonial Tools
2.1 Tax Rules: From FATCA to New DeFi Regulations
Tax rules are the foundation of America's new colonial model. FATCA compels global financial institutions to disclose asset information of U.S. citizens, setting a precedent for the weaponization of taxes. The new DeFi tax regulations further extend this logic by requiring DeFi platforms to collect and report user transaction data, expanding the U.S.'s control over the digital economy. With the implementation of these rules, the U.S. will gain more precise data on capital flows globally, further enhancing its control over the global economy.
2.2 The Combination of Technology and the Dollar: The Dominance of Stablecoins
In the $200 billion stablecoin market, dollar stablecoins account for over 95%, and their underlying assets are mainly U.S. Treasury bonds and dollar reserves. Dollar stablecoins represented by USDT and USDC, through their application in the global payment system, not only solidified the dollar's global position but also locked more international capital within the U.S. financial system. This represents a new form of dollar hegemony in the digital economy era.
2.3 The Attractiveness of Financial Products: Bitcoin ETFs and Trust Products
Bitcoin ETFs and trust products launched by Wall Street giants like BlackRock have attracted a large influx of international capital into the U.S. market through legalization and institutionalization. These financial products not only provide greater enforcement space for U.S. tax rules but also further incorporate global investors into the U.S. economic ecosystem. The current market size is $100 billion.
2.4 Tokenization of Real Assets (RWA)
The tokenization of real assets is becoming an important trend in the DeFi space. Aiying has learned that the scale of U.S. Treasury bond tokenization has reached $4 billion. This model enhances the liquidity of traditional assets through blockchain technology while creating new dominance for the U.S. in the global capital market. By controlling the RWA ecosystem, the U.S. can further promote the global circulation of Treasury bonds.
Part Three: Economy and Finance—Deficit Pressure and Tax Fairness
3.1 The U.S. Deficit Crisis and Tax Loopholes
The U.S. federal deficit has never been as concerning as it is now. In fiscal year 2023, the deficit neared $1.7 trillion, exacerbated by post-pandemic fiscal stimulus and infrastructure investments. Meanwhile, the global market capitalization of cryptocurrencies once exceeded $3 trillion, yet most of it remained outside the tax system. This is clearly intolerable for a modern nation that relies on tax revenue.
Taxes are the cornerstone of national power. Historically, the U.S. has always sought to expand its tax base under deficit pressure. The hedge fund regulatory reforms of the 1980s are a model of filling fiscal gaps by broadening the scope of capital gains taxes. Now, cryptocurrencies have become the latest target.
3.2 Financial Sovereignty and the Defense of the Dollar
But this is not just a tax issue. The rise of DeFi and stablecoins challenges the dollar's dominant position in the global payment system. Although stablecoins are extensions of the dollar, creating a parallel 'private currency' system by anchoring to the dollar, they also bypass the control of the Federal Reserve and traditional banks. The U.S. government realizes that this decentralized form of currency could pose a long-term threat to its financial sovereignty.
Through tax regulation, the U.S. not only intends to gain fiscal benefits but also aims to re-establish control over capital flows and defend the hegemony of the dollar.
Part Four: Industry Perspective—The Choices and Trade-offs of Practitioners
4.1 Assessment of the Importance of the U.S. Market
As a practitioner in DeFi projects, the first step is to rationally assess the strategic value of the U.S. market to the business. If the platform's main trading volume and user base come from the U.S. market, then exiting the U.S. could mean significant losses. However, if the U.S. market's share is not high, a complete exit becomes a viable option.
4.2 Three Major Response Strategies
Partial Compliance: A Compromise Path
Establish a U.S. subsidiary (such as Uniswap.US) focused on meeting compliance needs for U.S. users.
Separate the protocol from the front end to reduce legal risks through DAO or other community management methods.
Introduce KYC mechanisms, reporting necessary information only for U.S. users.
Complete Exit: Focus on Global Markets
Implement geographic blocking to restrict U.S. users' access through IP.
Concentrate resources on more crypto-friendly markets in the Asia-Pacific, Middle East, and Europe.
Complete Decentralization: Adherence to Technology and Ideals
Abandon front-end services and fully shift the platform to protocol autonomy.
Develop trustless compliance tools (such as on-chain tax reporting systems) to technically circumvent regulation.
Part Five: Deeper Reflections—The Future Game Between Regulation and Freedom
5.1 The Evolution of the Bill and Long-Term Trends
In the short term, the industry may delay the implementation of the rules through litigation. However, in the long run, the trend towards compliance is difficult to reverse. Regulation will push the DeFi industry into polarization: on one end are fully compliant large platforms, and on the other are small decentralized projects that choose to operate in secrecy.
The U.S. may also adjust its policies under global competitive pressure. If other countries (like Singapore and the UAE) adopt more lenient regulations on cryptocurrencies, the U.S. may relax some restrictions to attract innovators.
5.2 Philosophical Reflections on Freedom and Control
The core of DeFi is freedom, while the core of the government is control. This game has no endpoint. Perhaps the future of the crypto industry will exist in a form of 'compliant decentralization': where technological innovation coexists with regulatory compromise, and privacy protection alternates with transparency.
Aiying's Conclusion: The Inevitability of History and the Choices of the Industry
This bill is not an isolated event, but an inevitable result of the development of political, economic, and cultural logic in the U.S. For the DeFi industry, this is both a challenge and an opportunity for transformation. At this historical juncture, how to balance compliance with innovation and protect freedom while bearing responsibility is a question that every practitioner must answer.
The future of the crypto industry depends not only on technological advancements but also on how it finds its position between freedom and rules.
