Imagine your bank charged you a small fee every time you moved money from your checking account to your savings account. Not when you earned it. Not when you spent it. Just for relocating your own money between two accounts that both belong to you.
You’d assume it was a glitch. And when you found out it wasn’t (that it was the rule, working exactly as written) you’d think it was absurd. You’d be right.
That is, structurally, one of the things Illinois’s new Digital Asset Tax does. And it’s the cleanest evidence I’ve found that the people who wrote this law were taxing an activity they didn’t fully understand.
Let me show you exactly where it lives, because this isn’t a reading I’m straining to reach. It’s sitting right there in the definitions.
What the law actually says
The Digital Asset Tax Act puts a 0.2% tax on “digital asset business activity,” which it defines as exchanging, transferring, or storing a digital asset for a customer. “Exchanging” at least sounds like a trade. But look at how the statute defines transferring. Section 3‑15 says a “transfer” includes:
moving the digital asset from one account or storage of a customer to another account or storage of the same customer.
Read it twice. The same customer. One account of yours, to another account of yours. The law calls that a taxable event.
No sale. No gain. No counterparty. Nothing changed hands except the location of your own property — from your right pocket to your left. And the statute reaches for it anyway.
The tell: it taxes the asset, not the service
Here’s the part that gives the game away.
You might fairly object: “When a broker moves my coins, it’s providing a service — and states tax services all the time. What’s the problem?” That’s a reasonable question, and it deserves a straight answer.
The problem is that the tax isn’t 0.2% of the service. It isn’t a slice of whatever small fee the broker charges to move your asset. Section 3‑20 imposes the tax on “the value of the digital asset to which the digital asset business activity relates.” The asset. Not the fee.
So if you move $5,000 of Bitcoin from one of your own accounts to another, the tax is 0.2% of $5,000 (ten dollars) whether the broker charged you five dollars for that transfer or nothing at all. The number scales with how much of your own property moved, not with any service rendered and not with any trade made.
That’s the tell. A tax that grows with the size of your holdings every time they move (even when nothing is bought, sold, or gained) isn’t taxing a transaction; it’s taxing the rail. It’s taxing the act of movement itself.
Why this matters more than it looks
Taxing the rail instead of the trade isn’t a clever policy choice. It’s a category error.
Every tax we’re used to attaches to something economically real. Income tax on income. Sales tax on a sale. Capital gains tax on a gain. Each one has a thing underneath it — value that was created, exchanged, or earned. The self-transfer has none of that. It is an economic non-event. Taxing it tells you that whoever drafted this provision pictured “a crypto transaction” as one narrow thing ( i.e. - someone buying coins on an exchange) and then wrote a rule broad enough to sweep in everything that moves across the network, including the moves that aren’t transactions at all.
They taxed the plumbing. And you only tax the plumbing if you’ve quietly assumed the plumbing is the trade, which is the exact misunderstanding sitting at the center of this whole law.
Let me be precise about who this hits
This is where accuracy matters most, so I’m going to be careful.
You, personally, do not file anything for moving your own coins. You will not get a tax bill in the mail, and you are not committing any crime by relocating your own property. The law puts the collection duty on brokers (they add the tax and remit it, the way a store collects sales tax) and that cost gets passed through to customers. So the harm to you is real but indirect: you pay a little more, quietly, baked into the price of using a service.
The point of this piece isn’t “you’ll be hunted for moving bitcoin.” It’s narrower, and I think more damning: the taxable event itself is incoherent. A law that can be triggered when nothing has happened is a law that doesn’t describe the thing it claims to tax.
And here’s the honest part. Some of this could be narrowed later, when the Department of Revenue writes the implementing rules. Which is exactly the indictment. Illinois enacted a felony-backed tax first and left the definitions for later. The right order is the reverse.
The good news, and the ask
The text is still changeable. I believe the Department of Revenue has to write the rules that put this tax into practice, and that process is open to public comment. A definition this broad (one that taxes you for moving money between your own accounts) is precisely the kind of thing that careful, technical input can narrow before it ever takes effect on January 1.
So here’s what I’d ask. Learn this one well enough to say it to a neighbor in a sentence: Illinois wrote a tax that’s triggered when you move your own coins between your own accounts. That’s not a transaction, and a law that taxes non-events doesn’t understand what it’s taxing. Then carry it to the people who can fix it.
Tell your own state senator and representative, in your own words, that the law taxes movement that isn’t a trade, and that the definitions need narrowing before the rules are written. And join the list, so that when the Department opens its rules for public comment, you’re ready to be in the room. We have a section for comments on our webpage dedicated to the IL Digital Asset Tax.
We don’t need to exaggerate any of this. The facts are strong enough standing still. A tax that charges you for moving money from your right pocket to your left tells you almost everything you need to know about how well its authors understood what they were taxing.
Let’s help them understand.
Educational, written in good faith, and, as always, corrections welcome. The Illinois Bitcoin Council is a nonpartisan nonprofit. Good ideas don’t require force.