A16z has joined a legal battle with the Treasury and the IRS over DeFi rules.

Michelle Korver, head of regulation at Andreessen Horowitz's blockchain arm A16z Crypto, has expressed strong opposition to the new brokerage report regulation of the US Treasury and the IRS.

In a public statement, she said it threatens the future of decentralized finance (DeFi) innovation in the United States.

Treasury's “Midnight” Reporting Rule Lambasted

In a Dec. 30 tweet, Korver revealed A16z's support for the lawsuit filed by the DeFi Education Fund, the Blockchain Association, and the Texas Blockchain Council. The lawsuit aims to block regulations from the Infrastructure Investment and Jobs Act that would expand the definition of brokers to include front-ends of DeFi transactions.

These platforms, which allow users to connect to decentralized protocols, do not directly facilitate transactions, a distinction highlighted in the lawsuit. The groups argue that the rule imposes unnecessary burdens on DeFi entities, violates the Administrative Procedure Act (APA), and exceeds Treasury's statutory authority.

Korver described the regulatory process as a rushed “midnight” decision that undermines DeFi's ability to provide accessible, efficient and consumer-focused financial services. She also outlined the law's broader implications, warning it could stifle innovation and drive DeFi operations offshore.

A16z Crypto has repeatedly said it will defend the sector in a number of ways, including legal challenges and lobbying lawmakers with Congress and the incoming executive branch. Korver assured developers that industry advocates are working to protect this technology, an effort that is critical to maintaining the transformative potential of decentralized financial systems.

“We believe this final rule exceeds Treasury's statutory authority, violates the Administrative Procedure Act (APA), and is unconstitutional. Diffie developers should feel confident that industry advocates are working hard to protect this technology. We will continue to fight on all fronts – in the courts and with the help of Congress and the incoming executive branch.

The IRS will file a refund

Jake Chervinsky, a prominent voice in crypto policy and head of policy at the Blockchain Association, has pointed to the crypto industry's swift legal response to broker regulation, which was challenged within 24 hours of its announcement. Chervinsky praised the change in the industry's policy infrastructure in the USA over the past two years, expressing optimism about the future of crypto and its ability to push back against deregulation.

This stance has been echoed by other prominent figures in the crypto space. Unsiwap founder Hayden Adams criticized the regulation's timing and potential impact, suggesting it represented a deliberate attempt to stifle DeFi innovation. He expressed confidence in legal and legislative challenges to reverse the rule.

Meanwhile, Uniswap CLO Kathryn Minarik also said, “There is no good reason why the IRS's new regulation would classify DeFi Technology as a broker.” The official added

“It goes beyond the clear limits set by Congress, creates far more meaningless paperwork than the IRS can handle, contradicts itself in the technology, and imposes a burden that could derail DeFi entirely. To enable… unnecessary mass surveillance of crypto transactions by everyday Americans. DeFi is the antidote to bank bailouts.” The last thing we can do is try to choke to death next.