In 2023, Indonesian crypto exchanges experienced a staggering 60% decline in trading volumes, casting a shadow on the country’s reputation as a rapid adopter of digital assets. The industry points to high taxes as a potential factor contributing to this significant drop.

Indonesia, known for being among the fastest adopters of cryptocurrencies, attributed the sharp decline in transaction volumes to high taxes. Crypto assets in Indonesia are treated as commodities, subjected to both income tax and value-added tax (VAT).

Tax Burden Weighs on Traders

Leading crypto exchanges in the country highlight concerns that the cumulative taxes on transactions surpass the trading fees imposed by exchanges, potentially dissuading traders from participating in the crypto market. For each crypto transaction, users bear a 0.1% income tax and a 0.11% VAT, according to Oscar Darmawan, CEO of INDODAX crypto exchange. Additionally, exchanges must pay a 0.04% fee to the newly established national crypto bourse.

Proposed Solutions: Treating Crypto as Securities

Some industry voices propose a shift in the classification of crypto from commodities to securities, aligning its tax treatment with traditional assets like stocks. Yudhono Rawis, CEO of the Tokocrypto exchange, argues for an equitable tax regime, suggesting that both stocks and crypto, as tradable assets with profit potential, should share a consistent tax structure.

Anticipated Regulatory Shift in 2025

The upcoming transfer of crypto oversight from the commodities regulator to the Financial Services Authority (OJK) in January 2025 holds potential relief. Top Indonesian Crypto exchanges, including Reku, Tokocrypto, and INDODAX, anticipate that once oversight shifts to OJK and crypto is potentially reclassified as securities, the burden of VAT tax could be lifted.

Uncertain Future for Local Exchanges

While the industry pins its hopes on regulatory shifts for a potential revival in trading volumes, the current landscape remains unclear. The fate of local exchanges and the trajectory of trading volumes will likely hinge on forthcoming regulatory changes and their impact on the tax landscape.

As Indonesia grapples with this unprecedented drop in crypto trading, the industry awaits further developments in taxation policies and regulatory frameworks, hoping for a more conducive environment for both traders and exchanges.