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The U.S. Treasury and the IRS recently issued an important new regulation (RIN 1545-BR39) that expands the applicability of existing tax laws to include DeFi frontend service providers within the definition of 'brokers.' These service providers, including any platform that interacts directly with users (such as the frontend interface of Uniswap), are required to collect user transaction data starting in 2026 and submit information to the IRS via Form 1099 in 2027, including total user earnings, transaction details, and taxpayer identity information.
We all know that Trump's political stage has never lacked drama, and his attitude towards cryptocurrencies is no exception. From early criticisms of Bitcoin, calling it a 'scam based on air,' to later attempts through NFT projects and launching the DeFi project WorldLibertyFinancial (WLF), he even boldly suggested including Bitcoin in the country's strategic reserves (from the successful historical strategic land acquisitions in the U.S. to the forward-looking proposal of Bitcoin reserves (2025 Bitcoin Strategic Reserve Draft)), his actions reflect the drive of personal interests and imply the complex position of the crypto industry within the U.S. political system.
Although there is still a year or two before the new regulations come into effect, and there is considerable controversy regarding the definition of 'brokers,' as the old regulatory policies cannot be rigidly applied to crypto projects, they may also be overturned. However, Aiying would like to discuss the historical inevitability of the new regulations and how industry practitioners should make strategic choices from several dimensions.
Part One: The Logical Evolution from Traditional Colonization to New Financial Colonialism
1.1 The Resource Logic of Traditional Colonization
The core of traditional colonialism was to achieve resource plunder through military force and territorial occupation. The British controlled Indian cotton and tea through the East India Company, while Spain plundered gold from Latin America; these are typical cases of wealth transfer achieved through direct resource occupation.
1.2 The modern model of financial colonialism
Modern colonialism centers on economic rules, achieving wealth transfer through capital flow 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 industry, focusing on using technological means and rules to enforce global capital transparency, securing more tax revenue for the U.S. while strengthening its control over the global economy.
Part Two: The New Colonial Tools of the U.S.
2.1 Tax Rules: From FATCA to New DeFi Regulations
Tax rules are the foundation of America's new colonial model. FATCA forces global financial institutions to disclose asset information of U.S. citizens, setting a precedent for weaponizing taxes. The new DeFi tax regulations further extend this logic by requiring DeFi platforms to collect and report user transaction data, expanding America's control over the digital economy. With the implementation of this rule, the U.S. will gain more accurate capital flow data globally, thereby 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-pegged stablecoins account for over 95%, with the underlying assets mainly consisting of U.S. Treasuries and dollar reserves. Dollar stablecoins, represented by USDT and USDC, have not only solidified the dollar's global position through their application in the global payment system, but have also locked more international capital into the U.S. financial system. This is a new form of dollar hegemony in the digital economy era.
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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 integrate global investors into America's economic ecosystem. The current market size is $100 billion.
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2.4 Tokenization of Real-World Assets (RWA)
The tokenization of real-world assets is becoming an important trend in the DeFi industry. According to Aiying, the scale of U.S. Treasury tokenization has reached $4 billion. This model enhances the liquidity of traditional assets through blockchain technology while also 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 Treasuries.
Image source: rwa.xyz
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 remained outside the tax system. This is clearly intolerable for a modern state reliant on tax revenue.
Taxation is the cornerstone of state power. Historically, the U.S. has always sought to expand its tax base under deficit pressure. The hedge fund regulatory reform of the 1980s is a typical example, filling the fiscal gap by broadening the coverage of capital gains tax. Now, cryptocurrencies have become the latest target.
3.2 Defending financial sovereignty and the dollar
But this is not just a tax issue. The rise of DeFi and stablecoins challenges the dollar's dominance in the global payment system. Although stablecoins are an extension 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 form of decentralized currency could pose a long-term threat to its financial sovereignty.
Through tax regulation, the U.S. intends not only to gain fiscal benefits but also to re-establish control over capital flows and defend the dollar's hegemonic position.
Part Four: Industry Perspective - Choices and Trade-offs for Practitioners
4.1 Assessment of the Importance of the U.S. Market
As a practitioner in the DeFi project, the first step is to rationally assess the strategic value of the U.S. market for the business. If the platform's main trading volume and user base come from the U.S. market, then withdrawing from the U.S. could mean significant losses. Conversely, if the U.S. market share is not high, a complete exit becomes a viable option.
4.2 Three Major Response Strategies
Partial Compliance: The Compromise Path
Establish a U.S. subsidiary (such as Uniswap.US) focused on meeting the compliance needs of U.S. users.
Decouple the protocol from the frontend, reducing 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, restricting U.S. users' access through IP limitations.
Concentrate resources in markets more friendly to cryptocurrencies, such as the Asia-Pacific, Middle East, and Europe.
Complete Decentralization: Adherence to Technology and Philosophy
Abandon frontend services, fully transitioning the platform to protocol autonomy.
Develop trustless compliance tools (such as on-chain tax reporting systems) to technically bypass regulation.
Part Five: Deeper Thoughts - The Future Game of Regulation and Freedom
5.1 The evolution of the bill and long-term trends
In the short term, the industry may delay rule implementation through litigation. However, in the long term, the trend towards compliance is difficult to reverse. Regulation will lead to a polarization in the DeFi industry: one end will be fully compliant large platforms, while the other end will be small decentralized projects that choose to operate clandestinely.
The U.S. may also adjust its policies under global competitive pressure. If other countries (such as Singapore and the UAE) adopt more lenient regulations for cryptocurrencies, the U.S. may loosen certain restrictions to attract innovators.
5.2 Philosophical Reflections on Freedom and Control
The core of DeFi is freedom, while the core of government is control. This game has no endpoint. Perhaps the future of the crypto industry will exist in a form of 'compliant decentralization': a coexistence of technological innovation and regulatory compromise, alternating between privacy protection and 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 American political, economic, and cultural logic. For the DeFi industry, this is both a challenge and an opportunity for transformation. At this historical juncture, how to balance compliance with innovation, protect freedom while bearing responsibility, is a question 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 regulation.
Regulatory Document: https://public-inspection.federalregister.gov/2024-30496.pdf
This article is reproduced with permission from: (MarsBit)
Original author: Aiying compliance
‘Do you have to pay taxes on DeFi? Interpreting the new U.S. tax regulations: financial colonialism or an inevitable trend?’ This article was first published on ‘Crypto City’
