Illinois has moved to impose a new tax on digital assets, and some crypto advocates warn the measure could carry "severe consequences" for the industry within the state.
What the new law does
Governor Pritzker signed the "Digital Asset Tax Act" into law on Tuesday as part of the state's 2027 budget. The measure will levy a 0.2% tax on crypto activity in the state, covering instances where assets are transferred or purchased. The tax is scheduled to take effect on January 1, 2027.
According to the bill text, the tax would apply to activity physically conducted within the state, as well as activity by individuals whose "place of primary use" is in Illinois. The full levy would have to be collected by digital asset brokers, such as the major crypto exchanges that operate services in the state.
The industry's sharp objection
The Crypto Council for Innovation (CCI), a group of crypto advocates drawn from finance, tech, law, and government, addressed a letter to Governor Pritzker on Tuesday. The letter warned,
"If enacted, the Digital Asset Privilege Tax Act would position Illinois as the only state in the country to punitively tax Illinois customers for simply receiving covered digital asset business activity."
The group also labelled the measure the "most punitive digital asset tax" in the country.
"This will create an unprecedented tax regime that disproportionately burdens Illinois residents for simply using digital assets, and will drive innovation and builders out of the state,"it added.
How much the state expects to collect
The Illinois Policy Institute, a taxpayer advocate in the state, noted that lawmakers expect the bill to generate as much as $60 million next year.
The CCI stressed that no comparable transaction-based tax exists anywhere else in the country.
"No other state in the country has adopted a similar transaction-based tax, meaning Illinois would be an outlier in an increasingly competitive landscape for digital asset innovation,"the group wrote.
Questions over how the bill passed
The CCI also took issue with the manner in which the bill cleared the legislature, pointing out that affected parties were never given the opportunity to weigh in on the proposal.
"A first-of-its-kind tax targeting an entire industry and the Illinois residents who use its products and services calls for meaningful stakeholder engagement before enactment,"it said.
Crypto tax fights heat up at the federal level too
Earlier this month, seven new crypto tax bills were introduced in the U.S. Congress, with aims ranging from clarity on mining and staking taxes to the creation of a de minimis tax exemption. Shortly after being introduced, however, the bills ran into resistance during a House Committee hearing.
