“There is effectively no comparable state financial transaction tax on stocks, bonds or derivatives anywhere in the country,” said a16z general counsel Miles Jennings.
Illinois is going ahead with a 0.2% "privilege tax" on crypto transactions involving its residents under a new $55.9 billion state budget bill signed Tuesday.
Governor JB Pritzker signed the measure despite opposition from crypto industry groups over the provision, a transaction tax that applies to all digital asset transactions on any registered platform under broadly termed “digital asset business activity.”
“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,” the Crypto Council for Innovation said, as it urged a “line-item veto” of Article 3 of Senate Bill 3019 on Tuesday.
Illinois is home to several well-known crypto companies, including Zero Hash, Jump Crypto, Bitnomial, and Apex Crypto. The wide-reaching digital asset tax could also impact out-of-state companies if they have sufficient customer activity in the state, according to US tax firm BDO USA.
The measure, which takes effect on Jan. 1, 2027, will also make Illinois the only state to tax digital asset users regardless of income, gains or profits, unlike traditional tax structures. Digital asset brokers operating in the state are also required to register and comply with new reporting obligations.
Letter from the CCI to Governor JB Pritzker. Source: CCI
The CCI argued the tax would single out digital assets simply based on the technology used to process them.
Related: Crypto tax proposals weighed ahead of Tuesday House hearing
They also said the timing is poor, since the industry is already adjusting to the federal Digital Assets and Consumer Protection Act (DACPA) and Congress is separately working on a national tax framework for crypto assets.
The Digital Chamber sent a similar letter opposing the Digital Asset Privilege Tax Act on June 3 with similar arguments.
“The tax will discourage the use of digital assets at the very time when financial services are moving to the blockchain, freezing Illinois residents out of progress and innovation and pushing the existing IL blockchain and crypto companies out of the state,” it read.
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