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Formation of C‐N bonds through the electrochemical utilization of CO2 and nitrogen containing compounds (N‐compounds) is appealing for the purpose of converting waste and readily available sources or pollutants into value added chemicals at ambient conditions. Existing research predominantly explores these electrochemical reactions independently, often in aqueous electrolytes, leading to challenges associated with competitive hydrogen evolution reaction (HER), low product selectivity, and yield. Functional electrolytes such as those containing ionic liquids (ILs) present selective solubility to the solute reactants and present unique interactions with the electrode surface that can suppress the undesired side reaction HER while simultaneously co‐catalyzing the conversion of CO2 and N‐compounds such as N2, NO, NO2, andNO3. In this concept paper, we discuss how the microenvironment enabled by ILs can be  leveraged to stabilize reaction intermediates at the electrode‐electrolyte interface, thereby promoting C‐N bond formation on an active electrode surface at reduced overpotential, with the case study of CO2 and N‐compounds co‐catalysis to generate urea.