Illinois tax officials have published draft rules spelling out how the state's 0.2% digital asset transaction tax would apply to stablecoins, decentralized finance (DeFi) platforms, crypto bridges and transfers from centralized exchanges to self-custody wallets.

The draft rules, released by the Illinois Department of Revenue and posted to its website, provide implementation details for the already-enacted Digital Asset Tax Act, laying out which transactions and digital assets would fall within the scope of the levy. The department said Monday that it is accepting comments on the proposal through Oct. 30 as part of the rulemaking process, giving businesses and residents a window to shape the text before it is finalized ahead of the levy's start date.

Stablecoins taxable, NFTs excluded

Under the proposal, stablecoins would be treated as digital assets subject to the tax, while nonfungible tokens would be excluded from its scope. That treatment means stablecoin transactions would fall under the 0.2% levy once it takes effect. The distinction matters because stablecoins are pegged to fiat currencies and commonly used as a dollar-like medium for trading and payments, meaning the levy would reach assets designed to hold a steady value rather than only volatile tokens.

DeFi exemptions hinge on fee structure

DeFi transactions would generally be exempt unless users pay fees considered "valuable consideration," such as protocol fees collected for operating or maintaining a platform. Network fees and swap fees paid solely to liquidity providers would not trigger the tax. The fee-based test effectively draws the line for on-chain activity: routine swaps remain untaxed, while charges tied to operating a platform create a taxable event.

Bridging and self-custody transfers

The rules also identify crypto bridging as taxable exchange activity when it is conducted through a digital asset broker for consideration. Bridging involves moving tokens between blockchains, and under the draft rules it would be treated as an exchange in those circumstances. Transfers from centralized exchanges to self-custody wallets could likewise be subject to the tax when the exchange charges a fee, meaning the withdrawal itself becomes the taxable step in those cases.

Background

Illinois state lawmakers approved the Digital Asset Tax Act in June, advancing the measure despite opposition from crypto industry groups, which had pushed back against the transaction-based levy. The tax is scheduled to take effect on Jan. 1, 2027. The release of the draft rules marks the next step in implementing the levy, and the text could still be revised as the department reviews feedback before the compliance date arrives.

Source: Cointelegraph