The cryptocurrency industry in Indonesia is calling for regulatory reforms to improve its competitiveness against countries like Thailand and Japan.

Industry representatives argue that current tax policies and restrictions are limiting growth.

Currently, cryptocurrency investors in Indonesia face a final income tax of 0.2% and a value-added tax of 0.11% on each transaction.

Additionally, local platforms charge higher transaction fees than international ones, making domestic crypto trading less competitive.

🔗 Source: Katadata

🧠 Food for thought

1️⃣ Indonesia’s crypto tax rates create competitive disadvantage in growing Asian market

Indonesia’s combined tax burden on crypto transactions (0.2% income tax plus 0.11% VAT per transaction) significantly exceeds rates in competing jurisdictions, creating a structural disadvantage for domestic exchanges 1.

This contrasts sharply with Thailand, which has completely exempted the 7% VAT on digital asset transactions as of 2024, significantly reducing transaction costs for Thai crypto users 2.

The impact of these tax differentials is not theoretical. When Indodax lowered its transaction fee to 0.1% in 2021, it experienced an immediate and substantial increase in daily trading volume, demonstrating the direct relationship between transaction costs and market activity.

Singapore and Hong Kong have adopted capital gains tax exemptions for crypto investments, strategically positioning themselves as crypto hubs while Indonesia maintains its higher tax structure 3.

This tax disparity helps explain why Indonesian traders might seek offshore platforms despite Indonesia’s impressive growth to 28.52 million crypto users by 2024 4.

2️⃣ Regulatory transition signals Indonesia’s evolving approach to crypto integration

The planned transfer of crypto oversight from Bappebti to OJK by January 2025 represents more than an administrative change. It signals Indonesia’s recognition of crypto assets as financial instruments rather than mere commodities 5.

This regulatory evolution comes as Indonesia established itself as a leader in crypto adoption, with user numbers nearly tripling from 9.9 million in 2021 to 28.52 million in 2024, demonstrating significant market growth despite regulatory constraints 4.

The OJK has already begun preparing for this transition by issuing new regulations for banks and financial institutions regarding technology integration, including potential crypto services, marking a possible shift from Bank Indonesia’s previous prohibition on financial institutions processing crypto transactions 6.