Illinois Announces 0.2% Cryptocurrency Transaction Tax Regulation

The Illinois Department of Revenue announced on September 28 a proposed cryptocurrency tax regulation that will take effect on January 1, 2027. This regulation requires businesses providing exchange, transfer, and storage services for digital assets to charge customers in the state a fee of 0.2% of the asset value. Businesses with sales exceeding $100,000 from customers in the state will have the obligation to collect and remit the tax. Stablecoins are included in the taxable category, while non-fungible tokens (NFTs) and tokenized securities are excluded. DeFi transactions are generally exempt from taxation, but protocol fees are subject to tax. Swap fees paid to liquidity providers and network fees are excluded from the taxable category. Paid transfers from exchanges to self-custody wallets and bridges through businesses are included in the taxable category. The Director of the Illinois Department of Revenue stated that they aim to provide clear guidelines considering the novelty of the tax system and the complexity of the industry. Illinois enacted a law last August to regulate digital asset businesses and established a state-level transaction tax in June 2026. The industry group Digital Chamber of Commerce has filed a lawsuit against the state, claiming the regulation is unconstitutional. The tax burden on users is significant due to taxation on each transaction, raising concerns about businesses relocating outside the state.

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