This month, President Donald Trump signed an executive order establishing the nation’s first-ever federal Strategic Bitcoin Reserve, while on Capitol Hill a bipartisan group of lawmakers established the inaugural Crypto Congressional Caucus with the expressed goal to advance innovation in the digital assets space.
These actions send a clear signal: Digital assets — Web3, blockchain, cryptocurrency, decentralized finance and related technology — are the new foundational technology of the 21st-century digital economy.
This next frontier of innovation will bring cutting-edge advancements to every sector in Illinois, revolutionizing our manufacturing and agriculture industries, making a global financial marketplace accessible to vulnerable and rural communities, helping small businesses become more profitable and promoting financial inclusion from Chicago to southern Illinois.
Why Illinois?
In the Web3 and blockchain space, Illinois’ leadership is undisputed, with more than 320 startups operating in this space, earning $1.5 billion in venture-capital investment since this technology emerged. One-third of the top public companies headquartered in Illinois already have (or are actively making) significant investments in Web3 and blockchain technology. And the state has already secured more than $7 million in grants to advance digital assets research in our top academic institutions.
Now is the time to build on that leadership, and we can only do that through purpose-built blockchain regulation that clarifies rules of the road, enhances protections for consumers and incentivizes innovation and job creation in Illinois.
Unfortunately, a new proposal in the General Assembly would have a chilling effect on Illinois’ blockchain leadership, both now and in the future. Senate Bill 1797, the Digital Assets & Consumer Protection Act, attempts to establish a state regulatory framework for all entities innovating in digital assets, from established corporations to bourgeoning startups and entrepreneurs. Though well intentioned, the bill sweeps far too broadly and contains a number of structural flaws that would drive innovation out of our state.
Among other things, the act would establish a state-level licensing regime for anyone operating in blockchain and digital assets. Modeled off New York State’s BitLicense, the legislation would impose a burdensome, costly registration process for all players — startups, entrepreneurs, institutions and individuals — innovating in blockchain. The license, which could cost as much as $100,000 and take hundreds of hours to attain, would halt blockchain innovation in its tracks. Perhaps most disturbing, it would serve as a gatekeeper, limiting participation in blockchain innovation to well-funded, legacy corporations that have the time and bandwidth to navigate licensure.
Since the BitLicense was introduced in 2015 in New York, only 34 licenses have been approved, resulting in an exodus of startups and innovation from the state. This is not the model for Illinois.
What’s more, the Digital Assets & Consumer Protection Act attempts to govern both traditional financial institutions and entrepreneurs equally, a proven recipe for failure. The sweeping language in the legislation fails to consider the nuances that exist across the digital assets ecosystem, instead lumping together anyone who engages in “digital assets business activity.” That means the tech-savvy University of Illinois Chicago student playing with blockchain in his dorm and the artist using blockchain to sell certified copies of her digital artwork will be subject to the same restrictions as legacy financial institutions that serve as custodians for Illinois residents’ financial assets.
This one-size-fits-all approach is inconsistent with innovation and runs contrary to the fundamental promise of the digital assets industry: that all citizens and businesses can participate in trusted, disintermediated peer-to-peer transactions online. Forcing Illinois companies to serve as central intermediaries for those utilizing their platforms strips all incentive for startups to choose Illinois as their home base, potentially depriving the state of much-needed future tax revenue.
The good news is that Illinois doesn’t have to pursue state-level blockchain regulation right now. We have the most pro-innovation Congress in history in Washington, and leadership on both sides of the aisle has promised to codify blockchain, crypto and Web3 policy into federal law this year. The cross-border nature of blockchain and cryptocurrency requires a congressional solution.
The industry needs a market structure bill that thoughtfully considers the unique promises of digital assets and industry best practices. Establishing a federal regulatory framework will foster innovation, clarify industry oversight and compliance obligations for entrepreneurs, protect consumers and ensure market stability.
The Digital Assets & Consumer Protection Act sends the wrong message to Illinois’ startup community and to the state’s entrepreneurs, students and investors who believe in a future powered by blockchain. That future is taking shape now, and it’s up to Springfield to determine whether Illinois will lead it or watch it unfold from the sidelines.
Nelson Rosario is executive director of the Illinois Blockchain Association, a nonprofit membership organization advocating for a regulatory environment that supports and advances the state’s blockchain and digital assets community.