IRS’s DeFi Broker Rule Faces Backlash, Ripple CTO Highlights Risks

• IRS’s new DeFi rule could undermine decentralization by imposing KYC requirements.
• The IRS’s “broker” definition conflicts with SEC and CFTC regulations in crypto.
• Ripple CTO warns that users may turn to unsafe, anonymous DeFi platforms.

The IRS’s finalization of the second half of its controversial broker rule marks a significant shift in the regulatory landscape for decentralized finance (DeFi). Jake Chervinsky, the CLO of Variant Fund, stated that by the start of 2027, the rule would require a lot of DeFi front-ends to enforce Know Your Customer (KYC) processes for their users. 

This decision has sparked outrage in the crypto community, with critics arguing that the rule is an overreach of governmental power. Further, they stated that it violates constitutional rights, posing a threat to innovation in the DeFi space.

The Rule’s…

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