Providing for Congressional Disapproval Under Chapter 8 of Title United States Code, of the Rule Submitted By the Internal Revenue Service Relating to ``Gross Proceeds Reporting By Brokers That Regularly Provide Services Effectuating Digital Asset Sales''--

Floor Speech

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Mr. CRUZ. Mr. President, the decentralized finance industry is in its infancy. It is a new technology in the digital asset space which enables two individuals to exchange cryptocurrencies without a third party sitting in between them. Although that sounds straightforward, the technology holds potential for technological and financial innovation that we are just beginning to explore. In that sense, DeFi is a microcosm of the crypto revolution, which is unleashing innovation and economic growth and, indeed, personal liberty.

I think of my home State of Texas when it comes to cryptocurrencies. Texas is becoming an oasis for Bitcoin and for cryptocurrency worldwide. In Texas, we have abundant, low-cost energy, and as the energy capital of the world, Texas has both the expertise and the ethos of Texas.

The Lone Star State was founded by a bunch of wildcatters who were guys with fourth grade educations who began drilling holes in the ground. One after the other, they became the richest men on Earth. That is Texas, the spirit of Texas, and that is the spirit of crypto as well.

So what is the rule that Congress is in the process of repealing? At its core, DeFi was designed to allow individuals to freely buy, sell, and exchange digital assets without reliance on third-party intermediaries. It is ironic, therefore, that in the final hours of the Biden administration, the IRS finalized a new rule attacking America's cryptocurrency industry and more specifically DeFi.

Under the gross proceeds reporting by brokers that regularly provide services effectuating digital asset sales--that is a mouthful--the Biden administration expanded the definition of ``broker'' to include the software developers who create DeFi software, protocols, technology, and so on. They define ``coders''--computer programmers--as ``brokers.''

The IRS rule is untenable on its face. These software developers-- they never touch any of the cryptocurrency being exchanged. DeFi interfaces are neutral technological tools, not financial intermediaries. They do not facilitate transactions. The Infrastructure Investment and Jobs Act could not have been intended for software developers to be classified as financial intermediaries for the simple reason that their software never holds or controls user funds.

In fact, the rule is not just ironic, but it is incoherent. The software these developers are creating is designed to facilitate crypto exchanges between two individuals without a third party in between. What we have here are software developers--not brokers--developing software to facilitate peer-to-peer exchanges without brokers. That is the entire point.

If left in place, this rule would undermine innovation by turning developers into brokers and through reporting requirements that are incredibly onerous for crypto startups to meet. Those developers would inevitably go overseas instead.

If we were to allow this rule to stand, we would be handing China the opportunity to tighten its grip on the digital asset industry, stifling innovation, economic freedom, and financial sovereignty.

In that sense, this issue isn't just about crypto; it is about stopping unchecked Federal overreach. The Federal Government can do a lot of damage to crypto if the government screws it up.

The requirements, in turn, would risk the privacy of millions of Americans because software developers would be required to collect personal information and pass it on to the IRS.

Just for emphasis, this rule would compel DeFi developers--people who are creating cutting-edge technology to enhance the privacy of Americans--to collect, to store, and to report the personal identifying information of tens of millions of Americans and then hand it over to the IRS--an Agency with a long and well-documented history of mishandling sensitive taxpayer information.

These are serious privacy and surveillance risks. The IRS has already proven to the American people that it cannot be trusted, and it has already demonstrated its reckless disregard for privacy. Just last year, a former IRS contractor was sentenced to 5 years in prison for disclosing thousands of tax returns and return information for high- ranking government officials and related entities and individuals. These private taxpayer files were stolen and subsequently leaked to the press.

Indeed, DeFi is a powerful technology precisely because it undermines bureaucrat control over American citizens. The foundation of financial freedom is the right to engage in financial transactions without unnecessary government interference. The American people should be free to spend their money the way they see fit.

Far too often, we are increasingly seeing and hearing the opposite: threats to individual freedom, enforced through financial control. Banks are denying services to Americans because of their political beliefs or their line of work. We saw it first under Obama with Operation Choke Point, and we saw it again, tragically, under the Biden administration.

These actions aren't just abuses of power; they strike at the very foundation of a free society.

DeFi isn't controlled by Washington bureaucrats. Indeed, by design, it can't be. That is one of the many things I love about it. DeFi's noncustodial technology lets citizens hold and spend their own money, securely, without needing permission from some government-backed institution.

It is no wonder the Chinese Communist Party hates crypto in general and DeFi in particular. China has already banned cryptocurrency within its borders because it operates beyond government control, and central governments hate that. And, of course, the Chinese Government is one of the most dystopian, authoritarian regimes in the world, and so they have made cryptocurrency transactions illegal because they view those transactions--they rightly view those transactions--as threats to their authoritarian power.

So, yes, every time we create a new ecosystem using something like DeFi, that is an ecosystem insulated from China, and it is an ecosystem that China views as a threat. That is exactly why we must ensure that Americans have access to this technology. We should make sure it thrives right here in the United States.

There has been a lot of talk on both sides of the aisle about supporting cryptocurrency. We now have an opportunity to deliver results for the American people. Earlier this afternoon, we cast the initial vote on moving to proceed to the CRA to repeal this rule. I have to say, I was incredibly heartened that 70 Senators voted together in support of my legislation, and 18 Democratic Senators crossed the aisle and voted in support of repealing this ridiculous and abusive rule.

That is a powerful statement. It is a powerful statement to bitcoin and crypto that Congress is not going to let Washington crush the innovation that is driving so much prosperity. I thank the 18 Democratic Senators who crossed over, and on this final vote I urge even more: Come join us.

I will say--it is an interesting note--if you look at the list of the Democratic Senators who voted with us, it is almost every single Democratic Senator under the age of 60. There is a clear delineating line, and I think there is a reason for that.

Let's stand on the side of innovation. Let's stand on the side of jobs. Let's stand on the side of prosperity. Let's stand on the side of freedom. Let's foster innovation, cut government overreach, and unleash the full potential of the American economy. Let's rescind this rule, and let's unleash the future.

Mr. President, I yield back all time on Calendar No. 11, S.J. Res. 3.
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