Illinois has drawn attention after introducing a bill to impose a transaction tax on cryptocurrency trading for the first time in the United States, highlighting that state governments can raise the cost of using crypto regardless of federal-level regulatory harmonisation.

On June 29 local time, blockchain media outlet CryptoSlate reported that Illinois introduced a "Digital Asset Tax Act" that charges 0.2 percent of the transaction amount on cryptocurrency trading, transfers and custody services involving residents. It takes effect on Jan. 1, 2027.

Illinois Governor J.B. Pritzker (JB 프리츠커) signed the measure in mid-June by including it in the state's budget worth $55.9 billion. Those subject to the tax include cryptocurrency exchanges, custodians and brokers that provide services to Illinois residents. Direct wallet transfers between individuals are excluded, but taxes will be levied on most trades and asset transfers carried out through exchanges.

The move is significant because it runs separately from the cryptocurrency regulatory framework being pursued by the U.S. federal government. At the federal level, the GENIUS Act, a stablecoin regulation law, is currently in force, and the CLARITY Act, which defines market structure, is awaiting action in a full Senate session. The two bills focus on setting nationwide uniform standards for the legal status of crypto issuers, exchanges, brokers and tokens, and the supervisory framework.

The explanation is that federal law governs only the legal nature of cryptocurrencies and supervisory authority, and does not restrict state taxing powers. CryptoSlate explained that federal law takes precedence over state law only when a federal pre-emption clause is specified, when it directly conflicts with state law, or when federal law effectively excludes state discretion. It also analysed that Illinois' transaction tax does not directly conflict with federal regulation because it taxes commercial activity involving residents rather than reclassifying crypto as securities.

In particular, the House version of the CLARITY Act includes a provision preventing state governments from defining digital assets as securities on their own, but it does not include language limiting the imposition of transaction taxes. State governments have expressed concerns that expanded federal regulation could weaken their authority over fraud enforcement, remittance regulation and consumer protection.

The industry is concerned about how the tax is structured. The tax is levied on the gross transaction amount, not gains or losses. That means even loss-making trades must pay a 0.2 percent tax based on the size of the transaction. Out-of-state brokers that settle more than $100,000 a year involving Illinois residents are also included.

Brokers must register with the state government and collect the tax like a sales tax. That has raised the possibility that exchanges and brokers will pass the burden on to users through higher fees or wider bid-ask spreads. CryptoSlate said market makers and arbitrage firms that rely on low returns and high volumes are expected to be hit the hardest. Some operators may widen spreads or restrict services to Illinois residents altogether.

The industry is also watching the possibility that the move could spread to other states. The Crypto Council for Innovation, an industry group, described the transaction tax as the most punitive digital asset taxation in the United States. It is also sparking controversy because there is no similar state-level transaction tax on stock, bond or derivatives trading. The industry estimates the tax will allow Illinois to secure about $60 million in annual revenue.

The problem is that a federal regulatory overhaul alone may make it difficult to stop such taxation. The GENIUS Act, now in force, and the CLARITY Act, which is set for Senate deliberation, do not include provisions preventing state governments from imposing separate taxes on digital asset transactions. As a result, even if a nationwide unified regulatory framework long sought by the U.S. crypto industry is established, actual transaction costs borne by investors could differ by state.

The industry is focusing on the possibility that the Illinois case could become the first example showing that each state can pursue independent tax policies regardless of federal regulation.