This article addresses the significant impact of H.J. Res. 25, a joint resolution passed by Congress and signed into law by President Trump on April 10, 2025. This measure utilizes the Congressional Review Act (CRA) to disapprove and repeal the Internal Revenue Service (IRS) regulations outlined in Treasury Decision (T.D.) 10021, which were aimed at imposing information reporting requirements on certain participants within the decentralized finance (DeFi) sector of the digital asset industry. For tax practitioners, understanding the nuances of this repeal and the content of the now-defunct regulations is crucial for advising clients operating in or interacting with the digital asset space.[^1]

Impact of H.J. Res. 25: A Congressional Check on Regulatory Action

H.J. Res. 25, formally titled "Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Internal Revenue Service relating to 'Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales'", signifies a notable intervention by Congress into tax regulatory efforts. By passing this resolution under the CRA, Congress has effectively nullified T.D. 10021.[^2]

The key consequences of this disapproval are as follows:

Repeal of DeFi Broker Reporting Requirements: The core impact is the elimination of the impending information reporting obligations for certain DeFi participants who would have been classified as brokers under T.D. 10021. These brokers would have been required to report gross proceeds from cryptocurrency sales and their customers' personal information, such as names and addresses, to the IRS via Form 1099-DA, "Digital Asset Proceeds From Broker Transactions".[^3]
Prohibition on Similar Future Rules: A critical aspect of the CRA is that once a rule is disapproved, the IRS is prohibited from issuing the same rule or a substantially similar rule in the future.[^4] This significantly limits the IRS's ability to unilaterally implement similar reporting requirements for DeFi brokers without further legislative action from Congress.
Impact on IRS Information Gathering: Lisa M. Zarlenga of Steptoe & Johnson LLP noted that without these reporting requirements, the IRS will not automatically receive information from these DeFi brokers. However, she also pointed out that the IRS retains the ability to audit activity using tools such as John Doe summonses, which were available prior to the proposed digital asset reporting form.[^5]
Budgetary Implications: The Joint Committee on Taxation estimated in February 2025 that the removal of these regulations would lead to a $3.9 billion increase in the deficit.[^6] This highlights the anticipated revenue that the IRS expected to collect through enhanced reporting.
Potential Industry Shifts: Michael Kaercher of the Tax Law Center at New York University School of Law suggested that the repeal could incentivize the digital asset industry to develop more DeFi products, potentially further impacting the budget deficit due to reduced reporting.[^7]
Exclusion of Centralized Broker Rules: It is important to note that rules related to centralized digital asset brokers, which were addressed in T.D. 10000 issued in July 2024, were not part of this CRA resolution because the window for disapproval had passed.[^8]

T.D. 10021: A Rule That Will Never Take Effect

T.D. 10021, published on December 30, 2024, outlined final regulations regarding "Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales". These regulations, which were scheduled to apply to sales of digital assets occurring on or after January 1, 2027,[^9] aimed to clarify information reporting obligations for certain DeFi participants. Key aspects of T.D. 10021 that will now not be implemented include:

Definition of Digital Asset Middleman: The regulations defined a "digital asset middleman" as any person responsible for providing an "effectuating service" with respect to a sale of digital assets. This definition was a refinement of the proposed "digital asset middleman" concept and the term "facilitative services" from earlier proposed regulations (REG-122793-19). The change from "facilitative" to "effectuating" aimed to narrow the scope to align with the statutory definition of broker.
Treatment of Trading Front-End Service Providers as Brokers: A central tenet of T.D. 10021 was the treatment of "trading front-end service providers" in the DeFi space as brokers. The IRS reasoned that these providers have the closest relationship with customers and are best positioned to obtain necessary customer information. A "trading front-end service" was defined with specific criteria related to providing access to digital asset trading platforms and the indirect transmission of orders.
Definition of Effectuating Service: The regulations defined "effectuating service" to include "trading front-end service". Certain other services were initially considered but ultimately either included under the umbrella of front-end services or excluded.
Exclusion of Certain Activities: T.D. 10021 explicitly excluded certain activities from the definition of "effectuating services," notably "validation services" (such as proof-of-work and proof-of-stake) and the "licensing of software or selling of hardware" whose sole function is to permit control of private keys. This exclusion addressed concerns raised during the comment period about imposing reporting obligations on entities lacking access to customer transaction details.
Reporting Obligations: Had the rule taken effect, DeFi brokers would have been required to file information returns (Form 1099-DA) and furnish payee statements reporting gross proceeds from digital asset sales to their customers. They would have also been subject to record retention requirements.
Position to Know Standard: The regulations included a "position to know" standard to determine if a service provider was in a position to know the identity of the selling party and the nature of the transaction. This standard was deemed met if the person maintained control or sufficient influence over the effectuating services, such as having the ability to collect fees from the transaction flow.
Applicability Date and Transition Relief: The regulations specified an applicability date of January 1, 2027 for these DeFi broker reporting rules. Recognizing the need for industry preparation, the IRS issued Notice 2025-3 contemporaneously with T.D. 10021, providing transitional relief from broker reporting penalties and backup withholding under Section 3406 for sales occurring before January 1, 2028, under certain conditions. This relief, however, is now moot due to the repeal of the underlying regulations.

Conclusion: Navigating the Post-H.J. Res. 25 Landscape

The passage of H.J. Res. 25 marks a significant setback for the IRS's efforts to implement comprehensive information reporting for the DeFi sector. While centralized digital asset brokers remain subject to reporting requirements under T.D. 10000, the repeal of T.D. 10021 provides relief for DeFi participants who would have been classified as brokers.

For CPAs advising clients in this dynamic area, it is crucial to understand that:

The specific reporting obligations outlined in T.D. 10021 for DeFi brokers will not take effect.
The IRS is currently barred from issuing similar regulations without congressional approval.
While direct third-party reporting from these DeFi entities is eliminated, the IRS retains other audit tools.
The digital asset regulatory landscape remains subject to change, and future legislative efforts could revisit these issues.

Tax practitioners should remain vigilant for any future developments in digital asset taxation and reporting, ensuring their clients are informed of their ongoing compliance obligations under current law.

Prepared with assistance from Notebook LM.

[^1]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025

[^2]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025

[^3]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025

[^4]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025

[^5]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025

[^6]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025

[^7]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025

[^8]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025

[^9]: Tyrah Burris, “Trump Signs Repeal of IRS Crypto Reporting Requirements,” Tax Notes Today Federal, April 11, 2025