a16zcrypto Policy Chief Criticizes Illinois Cryptocurrency Tax Law: Tax Logic is Absurd and Violates Multiple Federal Laws

On June 17, Miles Jennings, the policy chief of a16zcrypto, stated that the digital asset tax law signed by the Governor of Illinois is one of the most restrictive regulations on cryptocurrency in the United States. The law imposes taxes on the exchange, transfer, and custody of digital assets: buying Bitcoin incurs a tax; storing Bitcoin on an exchange also incurs a tax, and so on. Across the United States, there are virtually no similar financial transaction taxes on stocks, bonds, or derivatives. This means that cryptocurrencies are being treated differently, which violates multiple federal laws. Furthermore, the logic behind this taxation is nonsensical: transactions involving paper certificates of stocks, bonds, and derivatives are not taxed, yet transactions recorded on a blockchain are taxed simply because of their format? This is akin to taxing emails. Illinois could have embraced blockchain innovation and enjoyed the cost advantages it brings to the general public; however, the state is instead preparing to penalize local entrepreneurs and ordinary residents who use cryptocurrency. It is truly regrettable. Just recently, Illinois introduced a reasonably scoped Digital Assets and Consumer Protection Act, demonstrating a positive and inclusive attitude towards blockchain technology. Yet, with this new tax policy, the attitude has taken a complete 180-degree turn. If states implement such discriminatory taxes that target only a single asset class, industry developers and ordinary users will migrate to other regions, ultimately resulting in losses for everyone.