Illinois Unveils Draft Rules for Crypto Taxation on DeFi and Stablecoins
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Illinois has released draft rules for a 0.2% digital asset transaction tax that will impact stablecoins, DeFi platforms, and crypto transfers. Stakeholders can submit comments on the draft until October 30, ahead of the tax's implementation in 2027.
Overview of Illinois' Draft Crypto Tax Rules
Illinois tax officials have provided draft regulations outlining how the state's 0.2% digital asset transaction tax will apply to various crypto activities, including stablecoins and decentralized finance (DeFi) platforms. These rules are part of the Digital Asset Tax Act, which was approved in June 2023.
Key Provisions
- Stablecoins: Classified as digital assets subject to the tax.
- DeFi Transactions: Generally exempt unless they involve fees considered "valuable consideration," like protocol fees. Fees paid to liquidity providers or for network transactions will not incur tax.
- Crypto Bridging: Taxable when performed through a digital asset broker for a fee. Transfers from centralized exchanges to self-custody wallets may also be taxed if a fee is charged.
The Illinois Department of Revenue is currently accepting comments on the draft rules until October 30, 2023. The tax is set to take effect on January 1, 2027, despite pushback from crypto industry groups.