Illinois Digital Asset Consumer Protection Act Compliance Deadlines Are Approaching - Ottosen DiNolfo Hasenbalg & Castaldo, Ltd

By Dominick Lanzito and Gianna Spada

Digital assets-including cryptocurrencies, stablecoins, and other blockchain-based tokens-represent a new class of financial instruments that exist and are transferred exclusively in digital form. As the digital asset market has expanded, so too have the threats posed to consumers by unregulated digital asset exchanges. Consumers participating in unregulated digital asset exchanges may face risks including but not hm1ted to cyber security attacks, market risks, and fraudulent exchanges.

In 2025, Illinois joined the growing number of states including New York, California, and Louisiana-that have passed legislation to regulate digital asset businesses and ensure consumer safety. The Digital Assets and Consumer Protection Act, signed into law by Governor JB Pritzker on August 18, 2025, aims to protect consumers by establishing oversight of digital asset businesses in the rapidly evolving digital asset market. The Act’s provisions were set to become effective following a transition period, which will soon end.

What the Act Changes

The Act provides that the Illinois Department of Financial and Professional Regulation (“IDFPR”) has the authority to regulate and supervise all digital asset business activity in Illinois. Digital asset businesses operating in Illinois must register with the IDFPR, unless exempted. Failure to register can result in fines of up to $100,000 per day that a digital asset business is in violation of the Act.

Businesses that apply for registration must implement plans and programs for addressing various critical risks including among other things a cybersecurity program, an anti-fraud program, an anti-money laundering program, and an operational security program.

In essence, the requirements imposed on digital asset businesses by the Act mirror current regulations for traditional financial services.

Consumer Protections and Disclosure Obligations

At the heart of Illinois’ approach is a commitment to protecting consumers. Digital asset businesses must provide clear pre-transaction disclosures, customer asset safeguards, and customer service standards. Particularly notable is the Act’s requirement that digital asset businesses that hold custody or control of a digital of an individual must continuously have in their possession enough of each specific digital asset to cover, in full, what the individual is owed in that digital asset.

This requirement serves to protect consumers’ interests in digital assets and to ensure that digital asset businesses hold adequate financial resources to operate efficiently.

Exemption for Local Governments

The Act applies to people doing business in Illinois who engage in activities relating to the exchange, transfer, or storage of digital assets. In other words, a covered person under the Act includes digital asset businesses. The Act does not apply to “the United States, a State, political subdivision of a State, agency, or instrumentality of federal, State, or local government.” 205 ILCS 731/1- 10(c)(1).

When Does the Act’s Transition Period End?

The Act provides for a transition period for digital asset businesses to ensure compliance with the Act’s requirements. Covered businesses that engage in digital asset activities have until July 1, 2027, to register with the IDFPR, and until January 1, 2027, to provide specified customer disclosures, comply with requirements for the protection of customer assets make available required customer service information’. and comply with requirements for making a covered exchange of digital assets. Those affected should take appropriate action.

Bottom Line

Illinois has joined the growing number of states that have passed legislation to ensure consumer safety in a world with an expanding digital asset market. The Digital Assets and Consumer Protection Act will soon

Become fully effective. Therefore, businesses engaged in digital asset activities should review their operations and create plans and policies to ensure compliance now.