US Treasury Drops Controversial Crypto Tax Rule: What It Means for You

The US Treasury Department has officially repealed a controversial crypto tax rule that would have placed heavy reporting requirements on decentralized finance platforms. How do those crypto regulations affect the market? Follow this article.

This decision follows months of debate in Washington and marks an important shift in how the US government plans to approach crypto tax reporting, reflecting broader discussions about balancing regulation with technological innovation.

Understanding the Crypto Tax Rule and Its Repeal

The rule in question, formally known as TD 10021 (RIN 1545-BR39), would have required decentralized exchanges and other crypto service providers to report detailed customer transaction data to the Internal Revenue Service under Section 6045 of the tax code. 

These requirements aimed to treat crypto platforms like traditional brokers, imposing strict reporting standards to track taxable cryptocurrency transactions.

However, many in the industry argued that this approach was unrealistic. Unlike traditional financial institutions, decentralized finance protocols often operate autonomously through smart contracts and lack centralized staff capable of collecting such data. 

Critics claimed these crypto tax reporting rules were technically unfeasible and risked pushing innovation out of the United States.

Read also: Could the State Seize Crypto Assets with the New California Crypto Law?

How the Rule Was Overturned

The repeal was achieved through the Congressional Review Act, a legislative tool that allows Congress to revoke recently implemented federal regulations. 

With strong support from Republican lawmakers, the resolution to eliminate the controversial tax rule passed earlier this year. President Donald Trump signed it into law in April, formally canceling the policy before it could take effect.

Notably, the crypto tax rule was not scheduled to be enforced until 2027. Even so, the US Treasury’s decision to remove it entirely sends a clear message about the government’s evolving stance on crypto tax regulations.

Read also: Germany's Largest Bank to Enable Bitcoin Trading in App: A Game-Changer for Crypto Adoption

Why the Crypto Industry Opposed the Rule

The crypto community reacted strongly against the original rule, warning that it would impose a heavy burden on decentralized finance. 

Forcing DeFi platforms to collect and report tax data would, according to critics, undermine the very principles of decentralization and transparency that underpin blockchain technology.

Industry experts also argued that blockchain transactions are already traceable on public ledgers, making some aspects of the proposed reporting redundant. 

While the rule was designed to improve tax compliance, many feared it would discourage innovation in the United States and drive companies to more crypto-friendly jurisdictions.

Read also: How Regulations Make Crypto Better? A Full Take

The Impact of the US Treasury’s Decision

By formally repealing the crypto tax rule, the US Treasury has signaled a willingness to listen to industry feedback and adapt regulations to the unique nature of blockchain technology. 

This decision is seen as a positive development for the crypto industry, which has long advocated for clear, workable guidelines that recognize the differences between decentralized systems and traditional finance.

However, it does not mean that crypto tax obligations have disappeared. Individuals and businesses in the United States are still required to report and pay taxes on cryptocurrency gains. 

What has changed is the approach the government will take to ensure compliance, indicating a move toward more practical, realistic solutions.

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Frequently Asked Questions (FAQ)

Is there any tax on crypto in the USA? 

Yes, in the USA, crypto is treated as property, so it's subject to capital gains and income tax. How much you pay depends on how long you held it:

• Short-term gains (held less than 1 year) are taxed like regular income, from 10% to 37%.
• Long-term gains (held over 1 year) have lower rates: 0%, 15%, or 20%. Crypto tax deadlines are the same as for traditional investments, usually April 15th.

How to avoid crypto tax in the USA? 

You can reduce your crypto taxes in the USA by holding your investments for more than one year before selling. The tax code favors long-term investments, offering lower capital gains tax rates for assets held for over 12 months.

Do you have to report crypto under $600 in the USA? 

Yes, you must report all crypto transactions to the IRS, regardless of the amount. This includes sales, trades, and income from activities like staking, mining, or airdrops. Even if an exchange doesn't send you a tax form for transactions under $600, they are still taxable and must be included on your tax return.

Do I pay taxes on crypto losses? 

Yes, you can write off crypto losses on your taxes, even if you don't have any gains. If your total capital losses are more than your total capital gains, you can deduct the difference on your tax return up to $3,000 per year ($1,500 if married filing separately).

Do you have to pay taxes if you convert crypto? 

Yes, converting one cryptocurrency to another is a taxable event. If you've held the crypto for a year or more before converting it, you'll pay long-term capital gains tax. If you've held it for less than a year, you'll pay short-term capital gains tax, which is taxed at the same rate as your ordinary income.