Illinois Publishes Draft Rules for Digital Asset Transaction Tax

Illinois has published draft rules outlining how its digital asset transaction tax will be applied to various types of crypto activity. The rules are part of the Digital Asset Tax Act, which was approved in June and is set to take effect on January 1, 2027.

The draft rules clarify that stablecoins will be treated as digital assets subject to tax, while non-fungible tokens (NFTs) will be excluded. DeFi transactions are generally exempt unless users pay fees considered 'valuable consideration', such as protocol fees collected for operating or maintaining a platform.

According to the rules, network fees and swap fees paid solely to liquidity providers would not trigger the tax. However, crypto bridging conducted through a digital asset broker for consideration is taxable exchange activity. Additionally, transfers from centralized exchanges to self-custody wallets could also be taxed when the exchange charges a fee.

The Illinois Department of Revenue is accepting comments on the draft rules until October 30. The tax was met with opposition from crypto industry groups, but it remains set to take effect in less than two years.