Illinois Set to Begin Taxing Bitcoin, Crypto Transactions as Critics Slam 'Most Punitive' Tax

In brief Governor JD Pritzker of Illinois signed a new digital asset tax bill into law, enacting a 0.2% tax on transactions starting in 2027. The Crypto Council for Innovation called it it the "most punitive digital asset tax" in the country. Estimates suggest the state could bring in around $60 million next year thanks to its implementation. A new digital asset tax signed into law in Illinois could have “severe consequences” for the industry in the state, according to some crypto advocates.The “Digital Asset Tax Act” signed into law by Illinois Governor Pritzker as part of the state’s 2027 budget on Tuesday will institute a 0.2% tax on crypto activity in the state, including when assets are transferred or purchased. The tax is set to take effect on January 1, 2027.“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 Crypto Council for Innovation (CCI) wrote in a letter addressed to Governor Pritzker on Tuesday. The group, which is made up of crypto advocates from finance, tech, law, and government, also called it 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. The tax would be imposed on activity physically conducted in the state, in addition to activity made by individuals that have a “place of primary use” in Illinois, according to the bill text. All taxes would need to be collected by digital asset brokers, like the major crypto exchanges that offer services in the state. 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. “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 CCI wrote.The firm also took exception to the way that the bill was passed, noting that affected parties did not get the chance to provide input 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. Seven new crypto tax bills were introduced in the U.S. Congress earlier this month, with focuses ranging from clarity on mining and staking taxes to the introduction of a de minimis tax exemption. But shortly after introduction, the bills faced pushback in a House Committee hearing.Daily Debrief NewsletterStart every day with the top news stories right now, plus original features, a podcast, videos and more.