Despite its status as a pioneer in the digital asset market, Indonesia saw a 60% decline in trading volumes on cryptocurrency exchanges in 2023.
Coincidentally, with the country’s treatment of cryptocurrencies as commodities, local exchanges have pointed the finger at income and VAT taxes as a possible cause of the decline.
Local exchanges are holding out hope that crypto’s reclassification as a security will reduce taxes and attract customers again.
Traders may have been scared off by Indonesia’s high taxes in 2023, according to industry sources, which contributed to a 60% drop in transaction volume on exchanges in the world’s fastest-growing cryptocurrency market.
Income and value-added taxes (VAT) are levied on cryptocurrency assets in Indonesia since they are considered commodities. Leading Indonesian crypto exchanges claim that the amount of all taxes paid on each transaction may exceed the trading costs required by exchanges for transactions. The industry is concerned that traders may be hesitant to purchase cryptocurrency due to the high cost of taxes and trading costs.
The chief executive officer of the cryptocurrency exchange INDODAX, Oscar Darmawan, said that users of cryptocurrencies pay a combined income tax and value-added tax of 0.1% and 0.11 percent of each cryptocurrency transaction, respectively. He also said that the recently formed national crypto bourse will be collecting a charge from exchanges equal to 0.04%.
“The domestic crypto industry is going to be hit hard financially because of this,” Darmawan told CoinDesk Indonesia in an interview.
Some members of the local cryptocurrency community have argued that consumers would pay less in taxes if the currency were classified as a security rather than a commodity.
Stocks and cryptocurrency are both assets that may be traded for a possible profit… The CEO of Tokocrypto, Yudhono Rawis, told CoinDesk Indonesia that it would be fairer and more consistent to apply the same tax policy to both of these financial products.
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