Illinois is making big moves in the digital asset space. A new law will bring a tax on certain cryptocurrency and digital asset transactions, while also expanding oversight of companies working in this area. This means that cryptocurrency exchanges, custodians, wallet providers, fintech firms, and other digital asset businesses serving Illinois customers may soon need to follow new rules for taxes, registration, reporting, and compliance.
With digital assets becoming more popular, now is a great time for any business with operations or customers in Illinois to start considering how these changes could impact their work.
Illinois Enacts the Digital Asset Tax Act
As part of the 2027 budget, Illinois has passed the Digital Asset Tax Act (DATA), which will introduce a 0.2% tax on certain business activities involving digital assets starting January 1, 2027. This tax generally applies to exchanges, transfers, custody, and storage of digital assets by digital asset brokers.
Digital asset brokers will need to collect this tax from customers, show it separately on invoices, and send it to the Illinois Department of Revenue. Businesses covered by the law will also need to keep records of taxable transactions and customer locations, and file regular reports with the state.
For businesses working with cryptocurrency and digital assets, these new rules add another layer of state tax compliance on top of existing income tax requirements.
Why the New Tax Is Drawing Attention
Unlike most taxes that are based on profit or net income, the Illinois digital asset tax is calculated on each transaction, using the value of the digital asset involved. This means you may need to pay the tax even if you take a loss on a transaction.
For instance, even if a resident of Illinois sells cryptocurrency for an amount less than the price at which it was originally bought, the transaction could still be liable for the 0.2% tax since the tax is calculated according to the transaction value and not on the taxpayer’s gain or loss. Although the taxpayer can still treat the loss for income tax purposes, the transaction tax will apply independently.
Because digital assets often move from one party to another, the same asset could be taxed multiple times as it changes hands. This could lead to higher costs for active traders and businesses in the digital asset market.
Broad Sourcing Rules Could Affect Out-of-State Businesses
The Digital Asset Tax Act could affect more businesses than you might expect.
The law applies not just to digital asset brokers with a physical office in Illinois, but also to companies in other states that earn at least $100,000 a year from Illinois customers. A transaction can be tied to Illinois based on details like the customer’s location, mailing address, account information, IP address, or other signs that Illinois is the main place of use.
Because of these sourcing rules, businesses outside Illinois may still have tax obligations if they serve Illinois customers, even with little or no physical presence in the state.
We recommend that digital asset businesses review their customer base, transaction activity, and connections to Illinois to see if they might be subject to the new tax.
Registration and Reporting Requirements
Businesses covered by the Digital Asset Tax Act will need to register with the Illinois Department of Revenue by January 1, 2027. During registration, they’ll need to name the person responsible for filing returns and paying the tax. Companies should also keep accurate records to support their taxable transactions and customer sourcing.
Digital asset brokers will also need to file regular reports and send collected taxes to the state. To get ready, businesses may want to update their accounting systems, customer onboarding processes, and record-keeping before the law takes effect.
Illinois Continues Building a Digital Asset Regulatory Framework
The Digital Asset Tax Act is part of Illinois’ broader effort to regulate businesses working with digital assets.
In 2025, Governor J.B. Pritzker approved the Digital Assets and Consumer Protection Act (DACPA) and the Digital Assets Kiosk Act (DAKA). The acts give the Illinois Department of Financial and Professional Regulation regulatory powers and set out the requirements concerning customer asset protection, disclosures, cybersecurity, anti-money laundering controls, fraud prevention, and financial responsibility standards.
The law also gives consumers important protection for transactions made through digital asset kiosks, including transaction limits, fee restrictions, and refund options for certain fraud victims. Illinois also plans to launch a registration system for digital asset businesses starting in 2027.
These steps show Illinois’ commitment to stronger oversight of the digital asset industry and to building a more complete framework for consumer protection and business regulation.
What Digital Asset Businesses Should Do Now
The Digital Asset Tax Act doesn’t take effect until 2027, but now is the time for companies to start reviewing their potential exposure. If your business is involved in cryptocurrency exchanges, digital asset custody, blockchain platforms, wallet services, or similar activities, we recommend evaluating your Illinois customer activity, checking for any possible nexus issues, and making sure you can accurately track customer location data.
We also suggest keeping an eye out for future updates from Illinois regulators. New rules and guidance may offer important details about registration, reporting, sourcing, and tax collection requirements.
The digital asset industry is evolving quickly, and states are introducing new ways to regulate and tax these activities. By preparing now, your business will be better positioned to manage compliance risks and avoid surprises in the future. Reach out to Vrakas CPAs + Advisors to start preparing now.
Sources
BDO. Illinois Enacts Potentially Wide-Reaching Digital Asset Tax. Published June 10, 2026. https://www.bdo.com/insights/tax/illinois-enacts-potentially-wide-reaching-digital-asset-tax
Illinois Department of Financial and Professional Regulation (IDFPR). Digital Assets. Retrieved on August 3, 2026. https://idfpr.illinois.gov/banks/digital-assets.html
Goldman, Nathan. Illinois’s Crypto Tax Could Tax You Even If You Lose Money. Forbes. Published July 15, 2026. https://www.forbes.com/sites/nathangoldman/2026/07/15/illinoiss-crypto-tax-could-tax-you-even-if-you-lose-money/
