Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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IRS Crypto Rollback Raises Questions for Canada
Crypto Regulation | April 15, 2025
Image: Freepik/rawpixel.com
Trump Repeals IRS Crypto Reporting Rule. Here's Why Fintechs in Canada Should Pay Attention
On April 10, 2025, U.S. President Trump signed a bill cancelling a key IRS crypto reporting rule that would have required decentralized finance (DeFi) platforms to report customer transactions to the tax agency.
See: UK FCA Plans Full Crypto Licensing Regime by 2026
The IRS' rule was called "Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales", which expanded the scope of traditional broker definitions to include DeFi apps like Uniswap and Metamask, and had an effective date of February 28, 2025. However, the IRS provided a transition period given the reporting complexities involved, so the rule was set to apply to digital asset sales occurring after January 1, 2027. But with Trump's bill nullifying the IRS rule, the implementation is now cancelled and the rule is officially gone.
What does this mean for fintechs, crypto startups, and regulators in Canada?
What Changed?
The IRS crypto reporting rule was part of a broader push to increase tax compliance among crypto users but industry argued that it wasn't manageable because DeFi platforms don't control their user's data. Often, there isn't a centralized entity to collect or report it. Develops were also at risk of facing penalties for software they didn't directly operate.
Industry associations and legal experts warned that the IRS's rule would push DeFi innovation offshore, so Congress listened and used the Congressional Review Act, and the House voted to repeal the rule on March 11.
See: Circle Files for IPO as Crypto Firms Eye Wall Street
Then the Senate did too with 70-28 bipartisan support on March 26. Now the bill has been signed into law and you can read it here.
Why It Matters to Canadian Fintechs
The repeal of the IRS DeFi crypto reporting rule signals again that the United States is backing away from aggressive regulation on crypto and decentralized platforms. It puts pressure on other jurisdictions including Canadian policymakers to clarify their own positions. Canada recently implemented it's own crypto reporting rules which the Canadian Revenue Agency (CRA) will start enforcing by 2027.
With the U.S. now seemingly a more welcoming environment for DeFi developers, Canada risks falling behind, especially if companies and capital start shifting strategies and offices to the U.S. for more flexibility and fewer rules. With the IRS rule now gone, DeFi projects based in the U.S. may suddenly look more appealing to venture capital and institutional backers. If that's the case, then Canadian fintechs would be at a disadvantage if local policies become too burdensome or vague.
Canadian users engaging with U.S. DeFi platforms may now face uncertainty over how these transactions should be reported domestically, given that there will be no equivalent enforcement on the U.S. side of the border. As such, the CRA may need to update guidance to avoid future confusion.
See: The Crisis Canada and Fintech Can’t Afford to Waste
With jurisdictions like the UAE, Singapore, Hong Kong, and the UK positioning themselves as global crypto centres, and the U.S. now looking like to be rejoining the global race, Canada will need to decide whether it can keep pace and remain competitive, or risk falling behind. The window to design a more innovation friendly approach to help strengthen Canada's role as a global fintech hub will only be open for a short time.
Outlook
Now is the time to ask tough questions about competitiveness, policy leadership, and how we balance innovation with responsibility. If we want to shape the future of financial services, we need to act quickly—and wisely.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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