• The Illinois Digital Assets and Consumer Protection Act (DACPA) could stifle the state’s tech growth by over-regulating blockchain and cryptocurrency startups.
• The Illinois Department of Financial and Professional Regulation (IDFPR), tasked with DACPA oversight, lacks the resources and technological readiness to effectively regulate this complex sector.
• The proposed regulations risk creating a two-tiered system favoring large companies and potentially driving innovation out of Illinois, similar to New York’s BitLicense experience.

Last month, the Illinois General Assembly advanced a sweeping bill that could severely undermine the state’s growing tech ecosystem.

The Digital Assets and Consumer Protection Act (DACPA), while framed as consumer protection, would impose burdensome licensing requirements and broad regulatory authority over hundreds of Illinois startups innovating in blockchain and cryptocurrency.

If signed into law, DACPA would task the Illinois Department of Financial and Professional Regulation (IDFPR) with overseeing one of the most complex and fast-moving sectors in the world.

But IDFPR is still in the midst of modernizing its own processes, relying primarily on paper applications and, just last year, described its own delays as a “crisis.” While IDFPR has launched a new online system, only a handful of the 300+ licenses it oversees have been converted—and full rollout is expected to take more than two years. It’s not feasible to expect the agency will be ready to regulate a cutting-edge, highly technical industry within the year.

More: Days of continued licensing delays in Illinois could be coming to an end

Let’s be clear: the blockchain and crypto community supports smart, targeted regulation that protects consumers and holds bad actors accountable. But DACPA misses the mark on several fronts.

First, it gives Illinois consumers a false sense of security. Most crypto scams originate offshore, far beyond the reach of state regulations. DACPA would do little to deter those bad actors—but it would impose significant costs and compliance burdens on legitimate Illinois-based startups who are building real-world tools using blockchain.

Second, the bill’s scope is overly broad. It doesn’t just target centralized exchanges or companies holding crypto on behalf of users, but also attempts to govern students, developers, and entrepreneurs experimenting with decentralized technologies that never interact with consumer funds. This could create a two-tier system where only large, wealthy companies can afford to navigate the complex licensing regime.

That runs contrary to Illinois’ values of equity and opportunity.

Importantly, many of these companies are already subject to extensive oversight. Illinois crypto firms may hold a Money Transmitter License or operate under existing state and federal regulation through agencies like the SEC, CFTC, and DOJ. DACPA introduces new layers of confusion and cost without clear benefit—exactly the kind of regulatory overreach that drives innovation out of state.

We’ve seen this play out before. New York implemented a similar system—the BitLicense—in 2015, approving just over 30 licenses since then. Many crypto companies have opted to geoblock New York residents altogether, stifling access and thwarting innovation. Illinois’ proposed regime is even broader in scope, which means the consequences here could be even more severe.

Now is not the time to over-regulate. With tech companies increasingly reshoring, Illinois should be rolling out the welcome mat—not standing up new barriers. The state has a chance to become a leader in responsible blockchain development, but only if it creates a regulatory framework that is clear, functional, and appropriately scaled to the risk.

Until that happens, lawmakers should reconsider Senate Bill 1797 and House Bill 742.

Katherine Kirkpatrick Bos is board member of the Illinois Blockchain Association and General Counsel of StarkWare, the developer of a cryptographic zero-knowledge proof system that seeks to improve scalability in blockchains. Prior to StarkWare, she was Chief Legal Officer of CBOE Digital, a U.S. regulated exchange and clearinghouse for spot crypto and crypto derivatives markets; and General Counsel of Maple Finance, a capital-efficient corporate debt marketplace which facilitates crypto institutional borrowing via liquidity pools funded by the DeFi ecosystem. She lives in Winnetka.