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The Blockchain Association, along with the Texas Blockchain Council and DeFi Education Fund, has filed a lawsuit against the U.S. Treasury Department and Internal Revenue Service (IRS) in response to newly issued rules imposing traditional broker reporting standards on decentralized finance (DeFi) industry participants.
The plaintiffs argue that these regulations exceed statutory authority, threaten the DeFi industry, and violate constitutional rights. The new definitions and requirements are seen as impractical and unconstitutional, with the potential to undermine the core functionality of DeFi by forcing it to conform to centralized models.
According to the complaint, the IRS lacks statutory authority to redefine “broker,” citing violations of the Administrative Procedure Act (APA). Furthermore, they raise constitutional concerns, asserting that these rules infringe on Fourth Amendment protections against unreasonable searches and Fifth Amendment rights to due process.
The lawsuit also highlights the potential economic and technological setbacks caused by compliance with these new regulations. Estimates suggest that the industry could face billions of dollars in annual costs, leading many DeFi operators, particularly startups, to shut down or relocate overseas. This would stifle innovation and reduce consumer access to secure, low-cost financial tools.
The Blockchain Association is seeking to enjoin the implementation of the rule, emphasizing the potential harm it may cause. The case adds to growing legal scrutiny of regulatory approaches to digital assets, a rapidly evolving sector crucial for modern financial innovation.
By Mark Hunter
Source: fullycrypto.com
