Illinois draft encryption tax rules detail the treatment of DeFi and stablecoins

Illinois draft rules on crypto taxes detail how the state's 0.2% digital asset transaction tax will apply to stablecoins, decentralized finance (DeFi) platforms, and other crypto activities.

Illinois tax officials have published a draft rule outlining how the state's newly enacted 0.2% tax on digital asset transactions will apply to stablecoins, decentralized finance (DeFi) platforms, and other crypto-related activities.

This new draft provides the details for the implementation of the law, including which transactions and digital assets will be covered by its scope. According to the proposal, stablecoins will be considered taxable digital assets, while decentralized tokens (NFT) will be excluded.

DeFi Transactions are usually exempt from this tax, unless the user has paid a fee that is considered to be "valuable consideration," such as the agreement fees charged for operating or maintaining the platform. Network fees and exchange fees paid solely to liquidity providers will not trigger this tax.

The rules also state that if encrypted cross-chain activities are conducted through digital asset brokers and involve consideration, they will be deemed taxable exchange activities. Such transfers may also be subject to taxation when centralized exchanges charge fees for transfers into self-hosted wallets.

Despite opposition from the cryptocurrency industry, Illinois still approved the "Digital Assets Tax Law" in June. The tax is set to take effect on January 1, 2027. The Illinois Department of Revenue stated on Monday that it will accept feedback on the draft, with a deadline of October 30.

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