Future of Crypto Regulation Under Trump Administration: Repeal, Reform, or Retreat?

Cryptocurrency has always been a volatile world with continuous innovation and corresponding regulatory uncertainties. With the continued growth of the crypto markets and the introduction of 1099-DA for reporting income to the IRS, a new question comes to mind: what’s the potential of a rollback of crypto regulations under the Trump administration? Let’s take a look at the current landscape and consider possible outcomes around the future of crypto regulation.

 

A Glimpse into Recent Developments 

On January 13, 2025, the IRS released IRB 2025-3, which delayed the implementation of DA reporting to DeFi brokers to tax year 2027, effectively delaying reporting rules for DeFi brokers two years with the first 1099-DA form being sent out in January of 2028 for DeFi brokers. 

 

On January 21, 2025, the Senate and House introduced a joint resolution challenging broker reporting regulations for non-custodial brokers under the Congressional Review Act. Cruz’s challenge is under the Congressional Review Act (5 U.S.C. Chapter 8), a rule allowing Congress to challenge regulatory guidance issued by agencies such as the IRS. If the joint resolution is passed by Congress and signed by the President, the rules relating to DeFi reporting obligations will have no effect. 

 

Just two days later, on January 23, 2025, President Donald Trump signed an executive order titled “Strengthening American Leadership in Digital Financial Technology.” During the campaign, the President branded himself as a “pro-crypto candidate” and made several promises, including, but not limited to, the creation of a US strategic cryptocurrency reserve. This EO signals a major shift in federal policy that aligns with the administration’s goal to position the US as a leader in the crypto space. 

In line with this policy shift, the Securities and Exchange Commission (SEC) has rescinded Staff Accounting Bulletin 121, which previously required institutions holding cryptocurrencies in a custodial capacity to record those holdings as liabilities on their balance sheets. This move has been welcomed by the crypto industry. Because it removes a significant barrier for custodians. 

 

Formation of bicameral crypto committee

A bicameral crypto committee has been formed. It comprised members from the Senate Banking Committee, Senate Agriculture Committee, House Agriculture Committee, and House Financial Services Committee. The main priorities of this committee are to create a stablecoin bill and a federal regulatory framework for digital assets. Senator Bill Hagerty has introduced legislation to create a framework for stablecoins, and future work in crypto regulation is expected to build upon this bill and the Financial Innovation and Technology for the 21st Century Act (FIT21).

 

 

Executive Order

The Executive Order (EO) is intended to:

• Protect and promote entities’ access to the use of public blockchain networks. 
• Promote fair and open access to banking services for the industry. 
• Provide much-needed regulatory clarity and certainty using a transparent process.
• Protect against the risks associated with a CBDC. 

 

On February 4, President Trump’s Crypto Czar, David Sacks, held a press conference, along with Senate Banking Committee Chairman Tim Scott (R-SC), Senate Agriculture Committee Chairman John Boozman (R-AR), House Agriculture Committee Chairman Glenn “GT” Thompson (R-PA), and House Financial Services Committee Chairman French Hill (R-AR).

During the interview, Sacks highlighted that the EO referred to supporting the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy. He also explained that the current regulatory approach has pushed innovation offshore and said his priority is to “keep [innovation] onshore.” 

 

 

Potential Impact on Key Crypto Regulations
 

1. Possible Changes to Foreign Crypto Broker Reporting 

• Current regulations largely exclude foreign brokers, assuming the U.S. would join the OECD’s Crypto-Asset Reporting Framework (CARF). 
• The EO does not clarify whether the administration will proceed with CARF, meaning foreign broker reporting rules remain uncertain. 

 

2. Impact on DeFi Regulations

• DeFi reporting rules (December 2024) face industry backlash, lawsuits, and potential Congressional repeal via the Congressional Review Act.
• The EO’s review may influence these legal battles and legislative efforts, potentially weakening or overturning DeFi tax reporting requirements.
• The IRS has delayed DeFi requirements for reporting as far as we can reasonably expect them to without an outright repeal at this point. 

 

3. Uncertain Future of Form 1099-DA

• Form 1099-DA, a tax reporting requirement for digital asset brokers, remains in effect—for now. However, the EO calls for a review of regulations. This means that Form 1099-DA could be delayed, modified, or repealed altogether.
• Centralized exchanges appear to be moving toward compliance, but decentralized platforms (DeFi) continue to push back.

 

What’s Next? 

The Trump administration signals a shift toward promoting industry growth with reduced or limited regulation. The current developments indicate a more crypto-friendly stance, aiming to provide clearer regulations and support for the digital assets industry. While Form 1099-DA is still in place, its future is highly uncertain. Businesses should monitor regulatory updates closely and see if the form is repealed, delayed, or significantly altered.