In the US, DeFi players have scored a victory with the scrapping of a tax rule affecting them. What did it involve, and are there parallels with Europe?
The US reverses a controversial tax rule for DeFi
On Friday in the US, the Internal Revenue Service (IRS), the local tax authority, formalized a decision that marks a victory for decentralized finance (DeFi).
A controversial rule that was supposed to come into effect at the beginning of the year has been scrapped after the House of Representatives and the Senate backtracked in March, leading to its signing by President Donald Trump on April 10. The controversial tax rule required certain DeFi protocols to pass on information about their users to the tax authorities:
This regulation (26 CFR part 1), enacted pursuant to section 6045 of the Internal Revenue Code, sought to require certain decentralized finance (DeFi) entities to file and transmit tax returns as brokers. The final text specified that it would take effect on February 28, 2025.
In the United States, it should be noted that taxation is different from France and that a transaction from one cryptocurrency to another is considered a taxable event generating capital gains or losses.
What about Europe?
In the European Union, we can see a certain parallel with the DAC8 directive, which will come into force on January 1, 2026, and will lead to the transmission of the first reports as of January 1, 2027.
DAC8 applies to Reporting Crypto-Asset Service Providers (RCASPs), which will be required to provide information about their customers to tax authorities, such as contact details, wallet addresses, and any identifiable information about crypto transactions.
The challenge here is to define what is considered an RCASP, which obviously includes centralized crypto platforms, but also certain pseudo-decentralized protocols if they have an identifiable entity. This last point leaves some ambiguity, which could include a number of DeFi players.
It should also be noted that this reasoning can be applied to MiCA. While its texts do not address DeFi players, the nuance here is that only fully decentralized players are currently excluded.
