Illinois has become the first U.S. state to introduce a transaction-based tax on digital assets, and the move is drawing sharp criticism from leading voices in the cryptocurrency industry. The Digital Asset Privilege Tax Act imposes a 0.2% tax on nearly every digital asset transaction, including purchases, sales, holding on exchanges, and even transfers between a user’s own wallets. Legal experts and industry groups warn this could set a damaging precedent and drive blockchain innovation out of the state.
Miles Jennings, general counsel for a16z Crypto, publicly condemned the proposal, calling it ‘irrational’ and noting that no other U.S. state imposes a similar financial transaction tax on stocks, bonds, or derivatives. ‘This is like imposing a tax on email,’ Jennings said, criticizing the arbitrary targeting of a technology-driven medium of exchange. He also raised concerns that the law could violate federal statutes governing interstate commerce and the taxation of financial instruments.
The tax differs fundamentally from traditional levies because it targets the act of using cryptocurrency rather than income, capital gains, or profits. Even transfers between a user’s own accounts are subject to the fee, which could pile up quickly for frequent traders or anyone using crypto for everyday payments. The Crypto Council for Innovation (CCI) sent a letter to Governor JB Pritzker on June 16, urging him to veto the measure and calling it potentially the most punitive digital asset tax in the nation.
Industry advocates argue the law could push developers, startups, and investment to more crypto-friendly states like Texas, Florida, or Wyoming, thereby costing Illinois long-term economic growth. The proposal also creates compliance headaches for exchanges and custodians operating in the state, while its broad language may encompass decentralized finance (DeFi) transactions that are peer-to-peer and harder to track.
As Governor Pritzker weighs the CCI’s veto request, the decision is being closely watched by both the crypto sector and other states considering similar bills. The outcome could either encourage a wave of protective taxation – or reaffirm the importance of fostering innovation in an industry still defining its rules.
