a16z Legal Counsel Challenges Illinois Digital Asset Tax as Potential Federal Law Violation

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On June 17, Miles Jennings, a16z's crypto legal counsel, criticized Illinois's proposed Digital Asset Privilege Tax Act, arguing it violates multiple federal laws. According to his statement on X, the law taxes digital asset exchanges, transfers, and storage—meaning users pay tax when buying Bitcoin, holding it on exchanges like Coinbase, and transferring it. Jennings noted that no comparable state-level financial transaction tax exists on stocks, bonds, or derivatives, making digital assets subject to discriminatory taxation. He also pointed out the inconsistency: taxing the same assets simply because they are recorded on blockchain while not taxing paper-based trades of identical securities. Illinois passed the tax provision in its June 1 budget bill, imposing a 0.2% tax on digital asset trading, transfer, and storage activities.
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