In 2023, Indonesia experienced a significant decline in transaction volume on its crypto exchanges, with a staggering 60% drop compared to the previous year. This decline has raised concerns within the industry, and local exchanges are pointing to high taxes as one of the factors driving traders away.
In Indonesia, crypto assets are currently treated as commodities and are subject to income tax as well as value-added tax (VAT). This means that users have to bear the burden of taxes on every crypto transaction, which can sometimes exceed the trading fees charged by exchanges. The heavy tax burden, coupled with trading fees, is believed to be discouraging traders from engaging in crypto transactions.
For example, Oscar Darmawan, the CEO of crypto exchange INDODAX, stated that crypto users in Indonesia are required to pay an income tax of 0.1% and a VAT of 0.11% on every transaction. Additionally, exchanges have to pay a 0.04% fee to the newly established national crypto bourse. Darmawan emphasized that these taxes place a significant financial burden on the domestic crypto industry.
To address this issue, some members of the local crypto industry propose treating crypto as securities instead of commodities. They argue that this change would alleviate the tax burden on users. Yudhono Rawis, the CEO of exchange platform Tokocrypto, stated that both stocks and crypto are tradable assets with profit potential, and implementing the same tax regime for both would be more equitable and consistent.
Fortunately, a change in crypto oversight is already on the horizon in Indonesia. In January 2025, the responsibility for crypto oversight will shift from the country’s commodities regulator to the Financial Services Authority (OJK). This transfer of oversight could potentially lead to crypto being classified as securities, and local exchanges believe that this could result in the removal of the VAT tax.
However, until this change takes effect, it remains uncertain how local exchanges will navigate further drops in transaction volume. The decline in trading activity has raised concerns about the sustainability of the crypto industry in Indonesia. Exchanges such as Reku, Tokocrypto, and INDODAX, which are considered the top exchanges in the country, are eagerly awaiting the shift in oversight and the potential reclassification of crypto as securities.
In conclusion, the dramatic drop in transaction volume on Indonesian crypto exchanges in 2023 has been attributed, in part, to high taxes. The heavy tax burden, combined with trading fees, is believed to discourage traders from engaging in crypto transactions. However, with the upcoming transfer of crypto oversight to the Financial Services Authority and the potential reclassification of crypto as securities, local exchanges are hopeful that some of the tax burden will be alleviated, leading to a resurgence in trading activity.