The Historical Inevitability Behind the New Tax Regulations: Reflections on the US New Financial Colonization and Decision-Making Strategies for Industry Practitioners
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have recently issued an important new regulation (RIN 1545-BR39) that expands the scope of existing tax laws to include front-end service providers in DeFi in the definition of 'brokers'. These service providers, including any platforms that interact directly with users (such as Uniswap's front-end interface), are required to collect users' transaction data starting from 2026 and submit information to the IRS through Form 1099 starting from 2027. The information includes users' total earnings, transaction details, and taxpayer identification information.
We all know that Trump's political stage is never short of drama, and his attitude towards cryptocurrency is no exception. From early criticism of Bitcoin as an 'air-based scam,' to later attempts with NFT projects and the launch of the Defi project WorldLibertyFinancial (WLF), and even boldly proposing the idea of including Bitcoin in the national strategic reserves in the forward-thinking concept of 'From America's historically successful strategic land purchases to Bitcoin reserves: the 2025 Bitcoin Strategic Reserve Draft,' his actions reflect personal interests and metaphorically represent the complex position of the cryptocurrency industry within the U.S. political system.
Although the new regulations will not take effect for another year or two, and there is quite a controversy over the definition of 'broker', after all, the old regulatory policies cannot be applied to cryptocurrency projects in such a rigid manner, so they may also be overturned. However, Aiying wants to discuss with everyone today the historical inevitability of the new regulations and how industry practitioners should make strategic choices from several dimensions.
Part 1: The Logical Evolution from Traditional Colonization to New Financial Colonization
1.1 Logic of Traditional Colonial Resources
The core of the traditional colonial era was to achieve resource plunder through military force and territorial occupation. Britain controlled India's cotton and tea through the East India Company, and Spain plundered gold from Latin America. These are typical cases of wealth transfer through direct control of resources.
1.2 The Modern Model of Financial Colonization
Modern colonialism revolves around economic rules, achieving wealth transfer through capital flows and tax controls. The Foreign Account Tax Compliance Act (FATCA) in the United States is a significant manifestation of this logic, requiring global financial institutions to disclose the asset information of US citizens, compelling other countries to participate in US tax governance. The new DeFi tax regulations are a continuation of this model in the digital asset field, focusing on using technological means and rules to force global capital transparency, enabling the US to gain more tax revenue and strengthen its control over the global economy.
Part 2: America's New Colonial Tool
2.1 Tax Rules: From FATCA to New DeFi Regulations
Tax rules are the basis of the new colonial model in the United States. FATCA, which forces global financial institutions to disclose the asset information of US citizens, has set a precedent for the weaponization of taxation. The new DeFi tax regulations further extend this logic by requiring DeFi platforms to collect and report users' transaction data, expanding US control over the digital economy. With the implementation of this rule, the United States will gain more accurate capital flow data globally, further enhancing its control over the global economy.
The combination of technology and the dollar: the dominant position of stablecoins
In the $200 billion stablecoin market, the US dollar stablecoins account for more than 95%, and the underlying assets are mainly US Treasury bonds and US dollar reserves. The US dollar stablecoins represented by USDT and USDC not only consolidate the global status of the US dollar through their application in the global payment system but also lock more international capital in the US financial system. This is a new form of dollar hegemony in the digital economy era.
2.3 The Attractiveness of Financial Products: Bitcoin ETF and Trust Products
Bitcoin ETFs and trust products launched by Wall Street giants such as BlackRock have attracted a large influx of international capital into the US market through legalization and institutionalization. These financial products not only provide greater enforcement space for US tax rules, but also further bring global investors into the US economic ecosystem. The current market size is $100 billion.
2.4 Real World Asset Tokenization (RWA)
The tokenization of real assets is becoming an important trend in the DeFi field. According to Aiying, the tokenization scale of US government bonds has reached 4 billion US dollars. This model enhances the liquidity of traditional assets through blockchain technology, and also creates a new dominant force for the United States in the global capital market. By controlling the ecology of RWA, the United States can further promote the global circulation of government bonds.
Part III: Economy and Finance - Deficit Pressure and Tax Fairness
2.1 US Deficit Crisis and Tax Loopholes
The US federal deficit has never been so worrying. In the 2023 fiscal year, the deficit will be close to $1.7 trillion, and the post-pandemic fiscal stimulus and infrastructure investment will only exacerbate this burden. At the same time, the global market value of the cryptocurrency market once exceeded $30 trillion, but most of it is outside the tax system. This is obviously unacceptable for a modern country that relies on tax support.
Taxation is the cornerstone of national power. Throughout history, the United States has always sought to expand its tax base under the pressure of deficits. The hedge fund regulatory reform in the 1980s was a model of filling the fiscal gap by expanding the coverage of capital gains taxes. And now, cryptocurrency has become the latest target.
2.2 Defense of Financial Sovereignty and the Dollar
But this is not just a tax issue. The rise of DeFi and stablecoins challenges the dominant position of the US dollar in the global payment system. Although stablecoins are an extension of the US dollar, creating a parallel 'private currency' system by anchoring the US dollar, they also bypass the control of the Federal Reserve and traditional banks. The US government realizes that this decentralized form of currency may pose a long-term threat to its financial sovereignty.
Through tax regulation, the United States not only intends to obtain financial benefits, but also seeks to re-establish control over capital flows and defend the hegemonic status of the US dollar.
Part Four: Industry Perspective - Practitioners' Choice and Trade-offs
3.1 Evaluation of the Importance of the U.S. Market
As a practitioner of DeFi projects, the first step is to rationally assess the strategic value of the US market to the business. If the platform's main trading volume and user base come from the US market, exiting the US may mean a huge loss. If the proportion of the US market is not high, then a complete exit could be a viable option.
3.2 Three Major Response Strategies
Partial Compliance: A Compromised Path
Establish a US subsidiary (such as Uniswap.US) to focus on meeting the compliance needs of US users.
Separate the protocol from the front end and reduce legal risks through DAO or other community-based management methods.
Introduce the KYC mechanism, and report necessary information only for US users.
Complete withdrawal: focusing on the global market
Implement geographical blocking, restrict access for US users through IP limitation.
Focus resources on cryptocurrency-friendly markets such as Asia-Pacific, Middle East, and Europe.
Fully Decentralized: Upholding Technology and Philosophy
Abandon front-end services and completely shift the platform to protocol autonomy.
Develop compliant tools that do not require trust (such as on-chain tax reporting systems) to bypass regulation technically.
You can also refer to Aiying's previous articles:
【Revelation】The court ruled that Lido DAO is a partnership enterprise: the legal challenges and compliance paths of Web3 decentralized governance
【Precedent Revelation】MyTrade Market Manipulation Guilty Plea, How Can Cryptocurrency Market Makers Deal with Legal Challenges?
【Precedent Insights】Key strategies behind the Bancor lawsuit in the Defi project, How do Web3 projects avoid U.S. jurisdiction?
Part 5: Deeper Reflections - the Future Game between Regulation and Freedom
4.1 Evolution and Long-term Trends of the Bill
In the short term, the industry may delay the implementation of the rules through litigation. However, in the long term, the trend towards compliance is difficult to reverse. Regulation will lead to a polarization in the DeFi industry: on one end, there will be large-scale platforms that are fully compliant, and on the other end, there will be small decentralized projects that choose to operate discreetly.
The United States may also adjust its policies under global competitive pressure. If other countries, such as Singapore and the United Arab Emirates, adopt more relaxed regulations on cryptocurrencies, the United States may relax certain restrictions to attract innovators.
4.2 Reflection on the Philosophy of Freedom and Control
The core of DeFi is freedom, while the core of the government is control. This game has no end. Perhaps the future of the cryptocurrency industry will exist in a form of 'compliant decentralization': combining technological innovation with regulatory compromise, and alternating between privacy protection and transparency.
Aiying conclusion: the inevitability of history and the industry's choices
This bill is not an isolated incident, but the inevitable result of the development of American political, economic, and cultural logic. For the DeFi industry, this is a challenge, but also an opportunity for transformation. At this historical juncture, how to balance compliance and innovation, protect freedom and bear responsibility, is a question that every practitioner must answer.
The future of the encryption industry depends not only on the advancement of technology, but also on how it finds its position between freedom and rules.
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
The Historical Inevitability Behind the New Tax Regulations: Reflections on the US New Financial Colonization and Decision-Making Strategies for Industry Practitioners
Author: Aiying pony
Regulatory Documents:
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have recently issued an important new regulation (RIN 1545-BR39) that expands the scope of existing tax laws to include front-end service providers in DeFi in the definition of 'brokers'. These service providers, including any platforms that interact directly with users (such as Uniswap's front-end interface), are required to collect users' transaction data starting from 2026 and submit information to the IRS through Form 1099 starting from 2027. The information includes users' total earnings, transaction details, and taxpayer identification information.
We all know that Trump's political stage is never short of drama, and his attitude towards cryptocurrency is no exception. From early criticism of Bitcoin as an 'air-based scam,' to later attempts with NFT projects and the launch of the Defi project WorldLibertyFinancial (WLF), and even boldly proposing the idea of including Bitcoin in the national strategic reserves in the forward-thinking concept of 'From America's historically successful strategic land purchases to Bitcoin reserves: the 2025 Bitcoin Strategic Reserve Draft,' his actions reflect personal interests and metaphorically represent the complex position of the cryptocurrency industry within the U.S. political system.
Although the new regulations will not take effect for another year or two, and there is quite a controversy over the definition of 'broker', after all, the old regulatory policies cannot be applied to cryptocurrency projects in such a rigid manner, so they may also be overturned. However, Aiying wants to discuss with everyone today the historical inevitability of the new regulations and how industry practitioners should make strategic choices from several dimensions.
Part 1: The Logical Evolution from Traditional Colonization to New Financial Colonization
1.1 Logic of Traditional Colonial Resources
The core of the traditional colonial era was to achieve resource plunder through military force and territorial occupation. Britain controlled India's cotton and tea through the East India Company, and Spain plundered gold from Latin America. These are typical cases of wealth transfer through direct control of resources.
1.2 The Modern Model of Financial Colonization
Modern colonialism revolves around economic rules, achieving wealth transfer through capital flows and tax controls. The Foreign Account Tax Compliance Act (FATCA) in the United States is a significant manifestation of this logic, requiring global financial institutions to disclose the asset information of US citizens, compelling other countries to participate in US tax governance. The new DeFi tax regulations are a continuation of this model in the digital asset field, focusing on using technological means and rules to force global capital transparency, enabling the US to gain more tax revenue and strengthen its control over the global economy.
Part 2: America's New Colonial Tool
2.1 Tax Rules: From FATCA to New DeFi Regulations
Tax rules are the basis of the new colonial model in the United States. FATCA, which forces global financial institutions to disclose the asset information of US citizens, has set a precedent for the weaponization of taxation. The new DeFi tax regulations further extend this logic by requiring DeFi platforms to collect and report users' transaction data, expanding US control over the digital economy. With the implementation of this rule, the United States will gain more accurate capital flow data globally, further enhancing its control over the global economy.
The combination of technology and the dollar: the dominant position of stablecoins
In the $200 billion stablecoin market, the US dollar stablecoins account for more than 95%, and the underlying assets are mainly US Treasury bonds and US dollar reserves. The US dollar stablecoins represented by USDT and USDC not only consolidate the global status of the US dollar through their application in the global payment system but also lock more international capital in the US financial system. This is a new form of dollar hegemony in the digital economy era.
2.3 The Attractiveness of Financial Products: Bitcoin ETF and Trust Products
Bitcoin ETFs and trust products launched by Wall Street giants such as BlackRock have attracted a large influx of international capital into the US market through legalization and institutionalization. These financial products not only provide greater enforcement space for US tax rules, but also further bring global investors into the US economic ecosystem. The current market size is $100 billion.
2.4 Real World Asset Tokenization (RWA)
The tokenization of real assets is becoming an important trend in the DeFi field. According to Aiying, the tokenization scale of US government bonds has reached 4 billion US dollars. This model enhances the liquidity of traditional assets through blockchain technology, and also creates a new dominant force for the United States in the global capital market. By controlling the ecology of RWA, the United States can further promote the global circulation of government bonds.
Part III: Economy and Finance - Deficit Pressure and Tax Fairness
2.1 US Deficit Crisis and Tax Loopholes
The US federal deficit has never been so worrying. In the 2023 fiscal year, the deficit will be close to $1.7 trillion, and the post-pandemic fiscal stimulus and infrastructure investment will only exacerbate this burden. At the same time, the global market value of the cryptocurrency market once exceeded $30 trillion, but most of it is outside the tax system. This is obviously unacceptable for a modern country that relies on tax support.
Taxation is the cornerstone of national power. Throughout history, the United States has always sought to expand its tax base under the pressure of deficits. The hedge fund regulatory reform in the 1980s was a model of filling the fiscal gap by expanding the coverage of capital gains taxes. And now, cryptocurrency has become the latest target.
2.2 Defense of Financial Sovereignty and the Dollar
But this is not just a tax issue. The rise of DeFi and stablecoins challenges the dominant position of the US dollar in the global payment system. Although stablecoins are an extension of the US dollar, creating a parallel 'private currency' system by anchoring the US dollar, they also bypass the control of the Federal Reserve and traditional banks. The US government realizes that this decentralized form of currency may pose a long-term threat to its financial sovereignty.
Through tax regulation, the United States not only intends to obtain financial benefits, but also seeks to re-establish control over capital flows and defend the hegemonic status of the US dollar.
Part Four: Industry Perspective - Practitioners' Choice and Trade-offs
3.1 Evaluation of the Importance of the U.S. Market
As a practitioner of DeFi projects, the first step is to rationally assess the strategic value of the US market to the business. If the platform's main trading volume and user base come from the US market, exiting the US may mean a huge loss. If the proportion of the US market is not high, then a complete exit could be a viable option.
3.2 Three Major Response Strategies
Partial Compliance: A Compromised Path
Establish a US subsidiary (such as Uniswap.US) to focus on meeting the compliance needs of US users.
Separate the protocol from the front end and reduce legal risks through DAO or other community-based management methods.
Introduce the KYC mechanism, and report necessary information only for US users.
Complete withdrawal: focusing on the global market
Implement geographical blocking, restrict access for US users through IP limitation.
Focus resources on cryptocurrency-friendly markets such as Asia-Pacific, Middle East, and Europe.
Fully Decentralized: Upholding Technology and Philosophy
Abandon front-end services and completely shift the platform to protocol autonomy.
Develop compliant tools that do not require trust (such as on-chain tax reporting systems) to bypass regulation technically.
You can also refer to Aiying's previous articles:
【Revelation】The court ruled that Lido DAO is a partnership enterprise: the legal challenges and compliance paths of Web3 decentralized governance
【Precedent Revelation】MyTrade Market Manipulation Guilty Plea, How Can Cryptocurrency Market Makers Deal with Legal Challenges?
【Precedent Insights】Key strategies behind the Bancor lawsuit in the Defi project, How do Web3 projects avoid U.S. jurisdiction?
Part 5: Deeper Reflections - the Future Game between Regulation and Freedom
4.1 Evolution and Long-term Trends of the Bill
In the short term, the industry may delay the implementation of the rules through litigation. However, in the long term, the trend towards compliance is difficult to reverse. Regulation will lead to a polarization in the DeFi industry: on one end, there will be large-scale platforms that are fully compliant, and on the other end, there will be small decentralized projects that choose to operate discreetly.
The United States may also adjust its policies under global competitive pressure. If other countries, such as Singapore and the United Arab Emirates, adopt more relaxed regulations on cryptocurrencies, the United States may relax certain restrictions to attract innovators.
4.2 Reflection on the Philosophy of Freedom and Control
The core of DeFi is freedom, while the core of the government is control. This game has no end. Perhaps the future of the cryptocurrency industry will exist in a form of 'compliant decentralization': combining technological innovation with regulatory compromise, and alternating between privacy protection and transparency.
Aiying conclusion: the inevitability of history and the industry's choices
This bill is not an isolated incident, but the inevitable result of the development of American political, economic, and cultural logic. For the DeFi industry, this is a challenge, but also an opportunity for transformation. At this historical juncture, how to balance compliance and innovation, protect freedom and bear responsibility, is a question that every practitioner must answer.
The future of the encryption industry depends not only on the advancement of technology, but also on how it finds its position between freedom and rules.