On April 10, the Illinois Senate passed Senate Bill 1797, also known as the Digital Assets and Consumer Protection Act, aiming to enforce stricter regulations on cryptocurrency operations statewide. The vote concluded 39-17, marking a significant step in the regulation of digital finance.

Spearheaded by Senator Mark Walker, the bill brings digital asset businesses under the oversight of the Illinois Department of Financial and Professional Regulation.

Comprehensive Registration and Disclosure Mandates

SB1797 sets out to enforce mandatory registration for all digital asset providers serving Illinois residents, regardless of where they are based.

The law mandates firms to present complete fee disclosures, outline whether customer assets are insured, and highlight risks such as cyberattacks, fraud, and loss of access.

Firms must also implement risk reviews for every crypto token listed and submit documentation proving their controls against manipulation and insider abuse.

Asset Custody, Lending Consent, and Legal Protections

The bill bars companies from using customer assets for lending without clear approval and mandates segregation of user funds from operational capital. In insolvency events, these assets would be handled as trust property, not corporate assets.

Moreover, the bill creates a consumer service protocol, requiring licensed entities to provide hotlines, fraud complaint channels, and resolution workflows.

Illinois Takes Action Amid Rising Crypto Crime

Senator Walker described the legislation as a proactive measure against rising crypto crime. According to the FBI, Illinois experienced over 1,900 fraud cases linked to crypto in 2023, placing it sixth nationwide.

The bill follows recent moves by other states, such as California’s AB 1052, expanding crypto protections for users, and North Dakota’s HB 1447, which tightened crypto ATM operations and compliance rules.