Illinois has published draft rules for its 0.2% digital-asset transaction tax, detailing how exchanges, transfers, bridging and custody services will be taxed when the law takes effect on January 1, 2027.
The charge is calculated from the value of the digital asset involved rather than the customer’s investment gain. A covered $10,000 transaction would therefore generate a $20 tax whether the position was profitable, sold at a loss or produced no gain at all. The underlying 0.2% transaction tax was enacted in June under the Digital Asset Tax Act.
The tax only applies when an Illinois customer receives a covered digital-asset service for valuable consideration through a qualifying digital-asset broker. Direct peer-to-peer transfers without an intermediary and without consideration remain outside the tax.
Exchange Withdrawals and Wallet Transfers Can Be Taxed
Covered activity includes spot trades, crypto-to-fiat conversions, fiat on-ramps, crypto swaps, certain derivatives settlements and bridging between blockchains. Transfers and paid custody services can also trigger the tax.
Moving crypto from a centralized exchange into a self-custody wallet can be taxable when the exchange facilitates the withdrawal and charges a fee. The same treatment can apply when a customer moves assets between two accounts they own if a qualifying broker handles the blockchain transfer for consideration.
A direct wallet-to-wallet transfer completed without a broker is not taxed. Transfers recorded only on an institution’s internal ledger without any movement on the blockchain can also fall outside the transaction definition.
Stablecoins are included, while network fees paid directly to miners or validators do not count as the consideration needed to create a taxable brokered transaction. DeFi swaps funded solely through liquidity-provider swap fees are also excluded, although protocol fees retained for operating a platform can bring activity inside the tax.
Brokers Must Collect the Tax From Illinois Customers
Covered brokers must add the tax as a separate charge, collect it from customers and remit it to the state. An out-of-state provider can also fall under the rules once annual receipts from digital-asset services sold to Illinois customers reach $100,000.
Customer location can be determined through an Illinois residential or business address, mailing address, IP address or other information establishing the customer’s primary place of use. Brokers will also have monthly filing obligations and recordkeeping requirements for taxable activity.
The approach differs from the federal crypto tax proposals considered this year, which have focused on issues including small-payment exemptions, mining and staking income, stablecoins and transaction-fee treatment rather than a state levy on the gross value of brokered activity.
The implementation rules remain drafts. Illinois is accepting public comments through October 30, and the rules had not yet been filed with the Secretary of State or submitted to the Joint Committee on Administrative Rules when they were published on September 28.
A separate House measure, HB5798, would repeal the Digital Asset Tax Act, but it has not advanced beyond introduction. Unless the law is changed before then, the 0.2% tax is scheduled to begin January 1, 2027.
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