Illinois General Assembly - 205 ILCS 731/ Digital Assets and Consumer Protection Act.

(205 ILCS 731/Art. 1 heading) Article 1. General Provisions (Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/1-1)

Sec. 1-1. Short title. This Act may be cited as the Digital Assets and Consumer Protection Act.

(Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/1-5)

Sec. 1-5. Definitions.

(a) As used in this Act:

"Affiliate" means any person that controls, is controlled by, or is under common control with another person. For purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person.

"Applicant" means a person that applies for registration under this Act.

"Bank" means a bank, savings banks, savings and loan association, savings association, or industrial loan company chartered under the laws of this State or any other state or under the laws of the United States.

"Confidential supervisory information" means information or documents obtained by employees, agents, or representatives of the Department in the course of any examination, investigation, audit, visit, registration, certification, review, licensing, or any other regulatory or supervisory activity pursuant to this Act, and any record prepared or obtained by the Department to the extent that the record summarizes or contains information derived from any report, document, or record described in this Act.

"Conflict of interest" means an interest that might incline a covered person or an individual who is an associated person of a covered person to make a recommendation that is not disinterested.

"Corporate fiduciary" shall mean a corporate fiduciary as defined by Section 1-5.05 of the Corporate Fiduciary Act.

"Covered person" means a registrant or person required to register pursuant to this Act.

"Covered exchange" means a covered person that exchanges or holds itself out as being able to exchange a digital asset for a resident as part of a business or on behalf of a customer who has entered into an agreement with a business for the provision of such services.

"Credit union" means a credit union chartered under the laws of this State or any other state or under the laws of the United States.

"Department" means the Department of Financial and Professional Regulation.

"Digital asset" means a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not fiat currency, whether or not denominated in fiat currency. "Digital asset" does not include any of the following:

(1) A digital representation of value that a merchant grants as part of an affinity or rewards program and that primarily relates to such affinity or rewards program.

(2) A digital representation of value that is issued by or on behalf of a game publisher and that is used primarily within online games or gaming platforms.

(3) Other digital representations of value that have substantial value, utility, or significance beyond the asset's mere existence as a digital asset, including digital equivalents of tangible and intangible goods such as: (A) works of art, musical compositions, literary works, and similar intellectual property; (B) collectibles and merchandise; and (C) licenses, tickets, and similar rights to attend events or participate in activities.

(4) A digital representation of value that is not marketed, used, promoted, offered, or sold for investment or speculation, except that this exclusion shall not apply to any digital representation of value that (A) is meme-based with no intrinsic value or utility or (B) is marketed, used, promoted, offered, or sold in a manner that intends to establish a reasonable expectation or belief among the general public that the instrument will retain a nominal value that is so stable as to render the nominal value effectively fixed. The Department may adopt rules to clarify the scope and applicability of this subsection.

(5) A digital representation of value that is used as part of prepaid cards.

"Digital asset business activity" means any of the following:

(1) Exchanging, transferring, or storing a digital asset as part of a business or on behalf of a customer who has entered into an agreement with a business for the provision of such services.

(2) Engaging in digital asset administration.

(3) Any other business activity involving digital assets designated by rule by the Department as may be necessary and appropriate for the protection of residents.

"Digital asset business activity" does not include (1) peer-to-peer exchanges or transfers of digital assets, (2) decentralized exchanges facilitating peer-to-peer exchanges or transfers solely through use of a computer program or a transaction protocol that is intended to automatically execute, control, or document events and actions, (3) the development, publication, constitution, administration, maintenance, and dissemination of software in and of itself, (4) the issuance of a non-fungible token in and of itself, and (5) validating a digital asset transaction, operating a node, or engaging in similar activity to participate in facilitating, operating, or securing a blockchain system.

"Exchange", when used as a verb, means to exchange, buy, sell, trade, or convert, on behalf of a resident, either of the following:

(1) A digital asset for fiat currency or one or more forms of digital assets.

(2) Fiat currency for one or more forms of digital assets.

"Exchange" does not include buying, selling, or trading digital assets for a person's own account in a principal capacity.

"Executive officer" includes, without limitation, an individual who is a director, officer, manager, managing member, partner, or trustee, or other functionally equivalent responsible individual, of a person.

"Federally insured depository institution" shall mean an insured depository institution as defined by Section 3(c)(2) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(c)(2), as amended, or an insured credit union as defined by Section 101(7) of the Federal Credit Union Act, 12 U.S.C. 1752(7), as amended.

"Fiat currency" means a medium of exchange or unit of value issued by the United States or a foreign government and that is designated as legal tender in its country of issuance.

"Insolvent" means any of the following:

(1) Having generally ceased to pay debts in the ordinary course of business other than as a result of a bona fide dispute.

(2) Being unable to pay debts as they become due.

(3) Being insolvent within the meaning of federal bankruptcy law.

"Non-fungible token" means any unique digital identifier on any blockchain or digital asset network used to certify authenticity and ownership rights that is not readily exchangeable or replaceable with a mutually interchangeable digital asset of the same value. The Department may modify this definition by rule.

"Person" includes, without limitation, any individual, corporation, business trust, estate, trust, partnership, proprietorship, syndicate, limited liability company, association, joint venture, government, governmental subsection, agency or instrumentality, public corporation or joint stock company, or any other organization or legal or commercial entity.

"Prepaid card" means an electronic payment device that, subject to any rules adopted by the Department:

(1) is usable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo, or is usable at multiple, unaffiliated merchants or service providers;

(2) is issued in and for a specified amount of fiat currency;

(3) can be reloaded in and for only fiat currency, if at all;

(4) is issued or reloaded on a prepaid basis for the future purchase or delivery of goods or services;

(5) is honored upon presentation;

(6) can be redeemed in and for only fiat currency, if at all;

(7) is governed by the Uniform Money Transmission Modernization Act; and

(8) complies with any other condition designated by rule by the Department as may be necessary and appropriate for the protection of residents.

"Qualified custodian" means a bank, credit union, or trust company, subject to any rules adopted by the Department.

"Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

"Registrant" means a person registered under this Act.

"Resident" means any of the following:

(1) A person who is domiciled in this State.

(2) A person who is physically located in this State for more than 183 days of the previous 365 days.

(3) A person who has a place of business in this State.

(4) A legal representative of a person that is domiciled in this State.

"Request for assistance" means all inquiries, complaints, account disputes, and requests for documentation a covered person receives from residents.

"Responsible individual" means an individual who has direct control over, or significant management, policy, or decision-making authority with respect to, a person's digital asset business activity in this State.

"Secretary" means the Secretary of Financial and Professional Regulation and any authorized representative of the Secretary.

"Service provider" means any person that provides a material service to a covered person in connection with the offering or provision by that covered person of a digital asset business activity in this State, including a person that either:

(1) Participates in designing, operating, or maintaining the digital asset business activity.

(2) Processes transactions relating to the digital asset business activity, other than unknowingly or incidentally transmitting or processing financial data in a manner that the data is undifferentiated from other types of data of the same form as the person transmits or processes.

"State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

"Store," "storage", and "storing", except in the phrase "store of value," means to store, hold, or maintain custody or control of a digital asset on behalf of a resident by a person other than the resident.

"Transfer" means to transfer or transmit a digital asset on behalf of a resident, including by doing any of the following:

(1) Crediting the digital asset to the account or storage of another person.

(2) Moving the digital asset from one account or storage of a resident to another account or storage of the same resident.

(3) Relinquishing custody or control of a digital asset to another person.

"United States dollar equivalent of digital assets" means the equivalent value of a particular digital asset in United States dollars shown on a covered exchange regulated in the United States for a particular date or period specified in this Act, subject to any rules adopted by the Department.

(b) Whenever the terms "include", "including" or terms of similar import appear in this Act, unless the context requires otherwise, such terms shall not be construed to imply the exclusion of any person, class, or thing not specifically included.

(c) A reference in this Act to any other law or statute of this State, or of any other jurisdiction, means such law or statute as amended to the effective date of this Act, and unless the context otherwise requires, as amended thereafter.

(d) Any reference to this Act shall include any rules adopted in accordance with this Act.

(Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/1-10)

Sec. 1-10. Applicability.

(a) This Act governs the digital asset business activity of a person doing business in this State or, wherever located, who engages in or holds itself out as engaging in the activity with or on behalf of a resident, to the extent not preempted by federal law and except as otherwise provided in subsections (b), (c), (d), or (e).

(b)(1) This Act does not apply to the exchange, transfer, or storage of a digital asset or to digital asset administration to the extent that:

(A) the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., or the Illinois Securities Law of 1953 govern the activity as a security transaction and the activity is regulated by the U.S. Securities and Exchange Commission or the Illinois Secretary of State; or

(B) the Commodity Exchange Act, 7 U.S.C. 1 et seq., governs the activity, the activity is in connection with trading of a contract of sale of a commodity for future delivery, an option on such a contract or a swap, and the activity is regulated by the U.S. Commodity Futures Trading Commission.

(2) This subsection shall be construed in a manner consistent with affording the greatest protection to residents and the Department's authority under subsection (a) of Section 1-15 to exercise nonexclusive oversight and enforcement under any federal law applicable to digital asset business activity. This subsection shall not be construed to exempt an activity solely because a financial regulatory agency has anti-fraud and anti-manipulation enforcement authority over the activity.

(c) This Act does not apply to the following persons:

(1) The United States, a State, political subdivision of a State, agency, or instrumentality of federal, State, or local government, or a foreign government or a subdivision, department, agency, or instrumentality of a foreign government.

(2) A federally insured depository institution.

(3) A corporate fiduciary acting as a fiduciary or otherwise engaging in fiduciary activities.

(4) A merchant using digital assets solely for the purchase or sale of goods or services, excluding the sale of purchase of digital assets, in the ordinary course of its business.

(5) A person using digital assets solely for the purchase or sale of goods or services for his or her own personal, family, or household purposes.

(6) A person who (A) contributes connectivity software or computing power or otherwise participates in the process of securing a network, (B) records digital asset transactions to the network or protocol governing transfer of the digital representation of value, or (C) develops, publishes, constitutes, administers, maintains, or otherwise distributes software relating to the network, so long as the person does not control transactions of digital assets on the network.

(7) A credit union with member share accounts insured by an insurer approved by the credit union's primary financial regulatory agency. An out-of-state credit union may not conduct any activity in this State that is not authorized for a credit union chartered under the laws of this State.

Nothing in this Act grants persons described in this subsection (c) authority to engage in any activity not otherwise granted under existing law.

(d) The Department may by rule or order clarify whether an activity is governed under this Act or another Act that governs money transmission. This subsection (d) shall not be applied in a manner inconsistent with the protection of residents.

(e) Notwithstanding any other provision of this Act, the Department, by rule or order, may conditionally or unconditionally exempt any person, digital asset, or transaction, or any class or classes of persons, digital assets, or transactions, from any provision of this Act or of any rule thereunder, to the extent that the exemption is necessary or appropriate, in the public interest, and consistent with the protection of residents.

(Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/1-15)

Sec. 1-15. General powers and duties.

(a) The Department shall regulate digital asset business activity in this State, unless it is exempt pursuant to Section 1-10. To the extent permissible under federal law, the Department shall exercise nonexclusive oversight and enforcement under any federal law applicable to digital asset business activity.

(b) The functions, powers, and duties conferred upon the Department by this Act are cumulative to any other functions, powers, and duties conferred upon the Department by other laws applicable to digital asset business activity.

(c) The Department shall have the following functions, powers, and duties in carrying out its responsibilities under this Act and any other law applicable to digital asset business activity in this State:

(1) to issue or refuse to issue any registration or other authorization under this Act;

(2) to revoke or suspend for cause any registration or other authorization under this Act;

(3) to keep records of all registrations or other authorizations under this Act;

(4) to receive, consider, investigate, and act upon complaints made by any person relating to any digital asset business activity in this State;

(5) to prescribe the forms of and receive:

(A) applications for registrations or other authorizations under this Act; and

(B) all reports and all books and records required to be made under this Act;

(6) to subpoena documents and witnesses and compel their attendance and production, to administer oaths, and to require the production of any books, papers, or other materials relevant to any inquiry authorized by this Act or other law applicable to digital asset business activity in this State;

(7) to issue orders against any person:

(A) if the Secretary has reasonable cause to believe that an unsafe, unsound, or unlawful practice has occurred, is occurring, or is about to occur;

(B) if any person has violated, is violating, or is about to violate any law, rule, or written agreement with the Secretary; or

(C) for the purpose of administering the provisions of this Act or other law applicable to digital asset business activity and any rule adopted in accordance with this Act or other law applicable to digital asset business activity;

(8) to address any inquiries to any covered person, or the directors, officers, or employees of the covered person, or the affiliates or service providers of the covered person, in relation to the covered person's activities and conditions or any other matter connected with its affairs, and it shall be the duty of any person so addressed to promptly reply in writing to those inquiries; the Secretary may also require reports from any covered person at any time the Secretary chooses;

(9) to examine the books and records of every covered person, affiliate, or service provider;

(10) to enforce the provisions of this Act and any state or federal law applicable to digital asset business activity;

(11) to levy fees, fines, and civil penalties, charges for services, and assessments to defray operating expenses, including direct and indirect costs, of administering this Act and other laws applicable to digital asset business activity;

(12) to appoint examiners, supervisors, experts, and special assistants as needed to effectively and efficiently administer this Act and other laws applicable to digital asset business activity;

(13) to conduct hearings for the purpose of carrying out the purposes of this Act;

(14) to exercise visitorial power over a covered person, affiliate, or service provider;

(15) to enter into cooperative agreements with federal and state regulatory authorities and to accept reports of examinations from federal and state regulatory authorities;

(16) to assign on an emergency basis an examiner or examiners to monitor the affairs of a covered person, affiliate, or service provider with whatever frequency the Secretary determines appropriate and to charge the covered person for reasonable and necessary expenses of the Secretary if in the opinion of the Secretary an emergency exists or appears likely to occur;

(17) to impose civil penalties against a covered person, affiliate, or service provider for failing to respond to a regulatory request or reporting requirement; and

(18) to conduct investigations, market surveillance, and research, studies, and analyses of matters affecting the interests of users of digital assets;

(19) to take such actions as the Secretary deems necessary to educate and protect users of digital assets;

(20) to develop and implement initiatives and programs to promote responsible innovation in digital asset business activity; and

(21) to perform any other lawful acts necessary or desirable to carry out the purposes and provisions of this Act and other laws applicable to digital asset business activity.

(d) The Department may share any information obtained pursuant to this Act or any other law applicable to digital asset business activity with law enforcement officials or other regulatory agencies.

(Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/1-20)

Sec. 1-20. Funds.

(a) All moneys collected or received by the Department under this Act shall be deposited into the Consumer Protection Fund, which is hereby created as a special fund in the State treasury. The amounts deposited into the Consumer Protection Fund shall be used for the ordinary and contingent expenses of the Department in administering this Act and other financial laws; nothing in this Act shall prevent the continuation of the practice of paying expenses involving salaries, retirement, social security, and State-paid insurance of State officers and employees by appropriation from the General Revenue Fund or any other fund. Moneys deposited into the Consumer Protection Fund may be transferred to the Professions Indirect Cost Fund or any other Department fund.

(b) The expenses of administering this Act, including investigations and examinations provided for in this Act, shall be borne by and assessed against persons regulated by this Act. The Department may establish fees by rule, including in the following categories:

(1) investigation of registrants and registration applicant fees;

(2) examination fees;

(3) contingent fees; and

(4) such other categories as may be required to administer this Act.

(c) The Department shall charge and collect fees from covered persons, which shall be nonrefundable unless otherwise indicated, for the expenses of administering this Act as follows:

(1) Each covered person shall pay $150 for each hour or part of an hour for each examiner or staff assigned to the supervision of the covered person plus actual travel costs for any examination of digital asset business activity pursuant to the Act.

(2) Each covered person shall pay to the Department its pro rata share of the cost for administration of this Act that exceeds other fees listed in this Act, as estimated by the Department, for the current year and any deficit actually incurred in the administration of the Act in prior years. The total annual assessment for all registrants shall initially be divided into a transaction-based assessment and a custody-based assessment, each equal to approximately half the cost for administration of this Act. Each registrant's pro rata share of the transaction-based assessment shall be the percentage that the total volume of digital asset transactions conducted on behalf of residents by the registrant bears to the total volume of digital asset transactions by all registrants in Illinois. Each registrant's pro rata share of the custody-based assessment shall be the percentage that the total United States dollar value of digital assets held in custody or controlled by the registrant for residents bears to the total United States dollar value held in custody or controlled by all registrants in Illinois for residents.

(3) Beginning one year after the effective date of this Act, the Department may, by rule, amend the fees set forth in this subsection in accordance with this Act. The Department is authorized to consider setting fees for digital asset business activity based on the value of digital assets transacted by covered persons, volume of digital assets transacted by covered persons, the value of digital assets held in custody by covered person, and the volume of digital assets held in custody by covered persons.

(Source: P.A. 104-428, eff. 8-18-25.)