The United States Internal Revenue Service (IRS) has announced that **DeFi brokers** must comply with long-standing securities rules, contradicting industry sentiment that argues for separate laws governing digital assets.

Updated IRS Rules for DeFi Brokers

As of December 27, the IRS has published updated rules requiring certain “DeFi brokers” to operate similarly to traditional finance institutions. These rules apply to “front-end” DeFi operators, which include service providers that directly manage websites used to access **web3 platforms**, such as decentralized exchanges, for both U.S. and non-U.S. participants.

Under the revised framework, DeFi brokers will be required to collect and report on user activity data and cryptocurrency proceeds. This includes reporting on all digital assets, including **NFTs** and **stablecoins**. According to Aviva Aron-Dine, acting assistant secretary for tax policy, the updated rules aim to level the taxpayer playing field and standardize reporting requirements for all participants.

Industry Reaction to IRS Rules

Crypto industry leaders have expressed disagreement with the IRS’s assertion that DeFi participants should be subject to the same information reporting rules as traditional financial services businesses. The Treasury Department and the IRS have stated that they do not agree that DeFi participants should be excluded from these rules due to a lack of financial services experience or comprehensive regulatory oversight.

“The Treasury Department and the IRS do not agree that DeFi participants should be excluded from the information reporting rules under section 6045 because of a lack of financial services experience or because of a purported lack of comprehensive regulatory oversight. Persons with technology expertise that operate trades or businesses relating to financial services should comply with the same rules as any other person operating financial services businesses.”

Concerns and Potential Litigation

Industry leaders, such as Consensys senior Attorney Bill Hughes, have expressed concerns that the new rules may lead to a loss of privacy and that most DeFi protocols may not be able to comply with securities laws. Digital asset advocacy groups, such as The Blockchain Association, have promised “aggressive action” against the IRS policies, including potential Congressional lobbying and litigation.

Key concerns and potential implications of the new rules include:

  • Loss of privacy for DeFi users and protocols
  • Potential non-compliance with securities laws for most DeFi protocols
  • Increased regulatory burden for DeFi brokers and operators

    • What’s Next for DeFi Brokers and Users

    The new rules are set to be enacted by January 1, 2027, unless there is significant pushback from the industry. DeFi brokers and users can expect increased regulatory scrutiny and reporting requirements in the coming years.

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