Developments in Crypto Regulation: DeFi Tax Reporting Repeal and SEC Disclosure Guidance
The Trump administration continues its efforts to relax digital asset regulation, including most recently by exempting decentralized finance ("DeFi") apps and wallets from tax reporting and through Securities and Exchange Commission ("SEC") staff interpretations, such as the Division of Corporation Finance's recent statement on disclosure requirements for digital asset offerings.
DeFi Tax Reporting Relief
On April 10, 2025, President Trump signed H.J.Res.25 (the "Bill") overturning Treasury regulations promulgated in December 2024 that would have extended IRS Form 1099 reporting requirements to certain DeFi participants by treating them as "brokers" under section 6045 of the Internal Revenue Code (the "DeFi Reporting Rules").
Effective immediately upon the Bill's signing, the DeFi Reporting Rules became void—meaning these DeFi participants are no longer considered brokers under section 6045 and therefore are not subject to the tax reporting obligations otherwise applicable to brokers. Further, under the Congressional Review Act, Treasury and the IRS are precluded from issuing any substantively similar rules without express Congressional authorization—providing certainty to DeFi participants going forward.
The Bill is limited to DeFi and does not universally relieve digital asset industry participants from tax reporting obligations, however, as digital asset exchanges continue to be considered brokers under section 6045.
SEC Staff Guidance on Digital Asset Offering Disclosures
On the same day that the DeFi Reporting Rules were repealed, the SEC's Division of Corporation Finance (the "Division") issued a statement with guidelines for tailored disclosures for digital asset securities offerings and registrations. This guidance covers a wide array of disclosure topics, such as descriptions of the business (including current and proposed business plans and network and application development), risk factors, descriptions of the securities (including rights, obligations, and preferences of holders; technical specifications, such as whether and how the underlying code for the crypto asset can be modified and how ownership of the securities is recorded; and limitations on the supply of the subject security), and financial statements.
Importantly, the Division notes that, because issuers are required to file as exhibits to their registration statements any instrument defining the rights, preferences, and obligations of security holders, crypto asset issuers may need to include as an exhibit to their filings the code of the smart contract(s) and/or the network or application that reflect those rights and obligations and update the exhibit when the code changes. Issuers are invited to contact the Division with questions about the application of the SEC's disclosure rules to crypto offerings and registrations.
