Illinois Introduces Controversial Crypto Tax: Users to Pay Monthly on Total Assets – Brokers as Tax Collectors?

The new tax law in Illinois is causing quite a stir in the crypto community. Starting now, users must pay 0.2 percent monthly on their entire crypto holdings—even if their coins are stored in a self-custody wallet. While brokers are initially supposed to withhold the tax, if they fail, the user is liable. No wonder this is causing head-scratching among many.
The Blockchain Association and the Consumer Choice Center have already filed lawsuits, but so far without success. The tax is now a reality—and that could have unpleasant consequences for many.
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What Changes for Crypto Users in Illinois?
The Illinois Department of Revenue has pushed through a regulation that affects every crypto owner in the state—whether you hold Bitcoin on Coinbase or keep your coins in a private wallet. The tax is 0.2 percent of the total value, due monthly.
What’s particularly tricky: Even if you don’t use a brokerage service, you must report and pay the tax yourself. If the tax authority later checks and finds no proper documentation, things could get costly. And yes, this affects even those who simply hold their coins without trading.
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Who Exactly Is Affected?
Essentially, almost everyone in Illinois who owns crypto:
- Individuals holding Bitcoin, Ethereum, or other coins—whether actively trading or holding long-term.
- Traders using major platforms like Coinbase or Kraken (where brokers should withhold the tax).
- DeFi users storing assets in smart contracts or non-custodial wallets.
- Businesses holding crypto on their balance sheets.
The problem: The tax is levied on total holdings, not just gains. Even if the value of your coins drops, you still have to pay. And if you use multiple wallets or DeFi protocols, things quickly become complicated.
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Why Is There So Much Backlash?
Many find the regulation simply nonsensical—for several reasons:
1. Nearly Impossible to Implement
Imagine having coins across



different wallets, DeFi protocols, and old exchange accounts. How can you accurately determine the monthly value? The bureaucracy could quickly turn into a nightmare.
2. Privacy? Not a Chance.
Crypto thrives on anonymity and self-sovereignty. But this tax forces users to disclose detailed information about their holdings—a direct contradiction to the ethos of the space.
3. Small Percentage, Big Impact
0.2 percent sounds small, but if you hold $50,000 in Bitcoin, that’s $100 per month—without making a single trade. This hits savers who simply hold their portfolios particularly hard.
4. Legal Gray Area
Critics argue the tax violates federal law by treating digital assets like "tangible property." A lawsuit has already been filed, but so far without success. The government seems determined to enforce the law—for now, at least.
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How Are Brokers and Users Responding?
Some major brokers, like Coinbase, have announced they will withhold the tax for their customers. But what about others? Many self-custody wallet users are wondering: "How will the tax authority even find out about my coins?"
Experts strongly advise documenting every transaction—from purchase receipts to wallet addresses. If the tax authority ever comes knocking, you’ll want to be prepared. At the same time, many hope for a quick resolution or at least an adjustment to the rules.
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A Warning Sign for Other States?
Illinois could set a precedent—and that’s not a good sign. If this tax works here, other states might quickly follow. And who knows? Maybe the percentages will increase.
For crypto users in Illinois, the only hope is for a swift turnaround. Until then: Document, document, document. And better ask once too often than face nasty surprises later.
The coming months will show whether this tax remains an isolated incident—or the start of a new era in crypto regulation. One thing is certain: Many will be watching closely.