So when President Trump signed legislation on April 10, 2025, repealing any digital asset reporting obligation for decentralized finance (DeFi) brokers, the legislation took effect immediately. This shift goes back on a provision included in last year’s Infrastructure Investment and Jobs Act (IIJA). It has incited uproar and concern across the crypto space. For now, DeFi platforms are exempt from this liability. The original law still left centralized exchanges that hold digital assets for their customers with information reporting obligations. Whatever the merits of this decision, it represents a landmark change to the regulatory landscape of digital assets in the United States.

Public Law No. 119-5 is a welcome, if imperfect change that directly addresses these inconvenient digital asset reporting mandates. It explicitly repeals these mandates on DeFi brokers. The new and expanded reporting obligations are included in Section 11415 of the Infrastructure Investment and Jobs Act (IIJA). This original provision aimed to bring familiar financial reporting fiduciaries into the new and growing digital asset world.

Legislative Impact and Industry Reaction

The removal of these reporting requirements for DeFi platforms is a huge victory for the decentralized finance sector. As a result, industry advocates said that the first set of regulations were unrealistic and produced innovation killing guardrails. He concluded that DeFi’s governance-less and ‘toxic’ environment presents major complications. Yet, this renders them virtually impossible to meet under archaic reporting frameworks.

Centralized exchanges are still left holding the bag of information reporting requirements. By 2026, these exchanges will begin issuing Form 1099-DA to users. This form will only report transactions occurring on or after January 1, 2025. You’ll rely on this form when reporting your digital asset transactions to the IRS. It would work exactly like how you report stock trades today.

KYC Implementation and Geofencing

To comply with the law ahead of full enforcement scheduled by 2027, numerous exchanges have preemptively rolled out — or bolstered — Know Your Customer (KYC) processes. These processes impose a significant burden on users, who must submit government-issued identification and other sensitive personally identifiable information to confirm their identities. Other exchanges have even taken extreme measures to lock out U.S. users through the use of geofencing. This move effectively bars them from using certain services or tools.

We took these actions to fix the harmful original IIJA rules. We further hope that exchanges would be required to provide more detailed reporting about their activities. If DeFi reporting obligations are nullified, this could lead some platforms to reconsider their KYC practices. Nonetheless, centralized exchanges need to urgently reverse course and adopt these practices, at a bare minimum, to comply with regulatory standards that already exist.

Expert Analysis and Future Outlook

RSM US has digital asset tax professionals closely monitoring these developments and advising clients on how to navigate the evolving regulatory landscape. The key to their success has been understanding how to become engaged and adjusting to the evolving game changers. Reinstating reporting requirements for DeFi platforms will undoubtedly make a big difference. If left to stand, this decision would have far-reaching implications on the future of digital asset regulation.

The argument over how best to regulate digital assets is just getting started. The industry continues to change at an incredible pace. Lawmakers and regulators will continue having a hard time trying to strike the right balance between fostering innovation and protecting consumers. Having gotten past the FTX debacle we can turn our attention to improving regulations for CEXs. Alongside this regulatory action, we’ll be looking at possible new ways of regulating DeFi that account for its distinct quality.