Biden's Crypto Rule Faces Backlash: Innovation at Stake?

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U.S. lawmakers oppose new crypto rule, fearing it could stifle innovation and drive blockchain out of the U.S. - IcoHolder.

A new Biden administration rule targeting cryptocurrency participants has sparked fierce opposition, as lawmakers and industry advocates warn it could drive blockchain innovation out of the United States. U.S. Senator Ted Cruz (R-Texas) and Representative Mike Carey (R-Ohio) have introduced a joint resolution to overturn the rule, finalized by the IRS on December 30, 2024.

The rule redefines decentralized finance (defi) participants as "brokers," requiring them to comply with stringent reporting obligations. Cruz and Carey argue this regulatory approach burdens the digital asset industry and contradicts America’s innovation goals. Cruz criticized the measure as an attempt to stifle cryptocurrency progress, stating, “This regulation undermines the purpose of defi technology: to enable individuals to freely buy, sell, and exchange digital assets.”

Carey echoed these concerns, labeling the rule as “clear overreach” by the IRS. He warned that compliance would overwhelm the agency with unnecessary digital asset filings and complicate the tax-filing process for Americans.

The resolution has garnered support from lawmakers, including Senators Cynthia Lummis (R-Wyo.) and Thom Tillis (R-N.C.), alongside industry groups such as the Blockchain Association and the Digital Chamber. Advocates argue that rescinding the rule is essential for protecting the U.S. cryptocurrency sector and ensuring the country remains competitive in blockchain innovation.

The debate underscores broader tensions between regulatory efforts and technological advancement in the cryptocurrency space. While the outcome of the resolution remains uncertain, it has reignited discussions about how the U.S. can balance oversight with fostering innovation in a rapidly evolving industry.