Illinois has become the first state to tax digital asset transactions, creating a new cost that could apply every time crypto changes hands. The Digital Asset Tax Act, added to the state’s sprawling annual budget bill at the last minute, imposes a 0.2% tax on the value of digital assets involved in each covered transaction.
Unlike a capital gains tax, the new measure applies regardless of whether an investor makes money. An Illinois resident who buys $10,000 in crypto and later sells it for the same amount would owe $40 in taxes across both transactions—even without making a profit. The tax also applies to exchanges, transfers, and certain custodial activities involving digital assets.
The tax takes effect at the start of 2027.
Adding Friction
Rather than collecting the tax directly from customers, Illinois will require the businesses facilitating digital asset transactions to administer it. Crypto exchanges will be responsible for charging and collecting the tax, as will firms that provide digital asset custody services.
“When you tax the movement of digital assets rather than the capital gains they generate, you risk pushing activity elsewhere,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Adding a transaction tax adds friction, so the long-term question isn’t whether Illinois raises more tax revenue, but whether digital asset businesses want to even operate in that state moving forward.”
Who the Law Affects
The law requires platforms through which Illinois residents buy, sell, or trade digital assets to register as digital asset brokers. It applies to businesses that generate at least $100,000 in annual gross receipts from providing digital asset services to Illinois residents, even if the business is based out of state.
Since the tax applies to each covered business activity, a single series of transactions could trigger multiple taxable events. For instance, if a customer purchases Bitcoin and then transfers it from a custodial account to a private wallet, each step would be treated as a separate taxable transaction.
The Illinois Policy Institute, a taxpayer advocacy organization, estimates the tax will generate as much as $60 million in revenue next year. But crypto industry groups, including the Crypto Council for Innovation, have strongly opposed the measure, as has the chairman of the Commodity Futures Trading Commission (CFTC), Michael Selig. “The choice to plunder crypto wallets rather than promote economic growth may go down in history as Chicago’s last trade,” Selig wrote on X.
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