Thai SEC Rejects Spot Bitcoin ETF Proposals, Investors Shift Focus to International Markets

Crypto exchanges in Indonesia have reported a steep decline in trading volumes over the past few months. Industry experts attribute this drop significantly to the government’s move to impose higher capital gains tax rates on crypto profits. There had been warnings from the crypto community that increased taxation could dampen trading activity, but the real impact is only becoming apparent now.

Tax Policy Tweaks Take a Toll

In January, the Indonesian Tax Office notified revisions to the capital gains tax rates applicable on crypto profits. Previously, crypto gains were taxed at a flat rate of 0.1% of the transaction value. However, under the new rules, profits from the sale of digital assets like Bitcoin and Ether are now subjected to income tax slabs of up to 30%. With the top income tax bracket kicking in after annual earnings of IDR 500 million, frequent crypto traders now face a significantly higher tax outgo. Data from major Indonesian exchanges suggests trading volumes started declining substantially right after the new policy took effect in April. Compared to January levels, the average daily trade value had dropped by almost 40% on some platforms by the end of June.

Ripple Effects in the Crypto Ecosystem

The reduction in crypto trading has rippled through the broader virtual asset industry in Indonesia. With fewer exchanges of digital currencies, the fee income of platforms has reduced considerably. This has led to cost-cutting measures like layoffs at some exchanges. Mining operations, too, have been impacted as reduced trading interest has pulled down coin prices, denting the profitability of minting new tokens. Industry experts note that retail participation has especially thinned out as the prospect of higher taxes diminishes returns for small-time traders and investors. While institutional buying and selling remain somewhat resilient, overall market sentiment has clearly taken a hit in the world’s fourth most populous nation due to the tax policy adjustments.

Outlook and Alternatives

If the present scenario continues, there are concerns that Indonesia’s crypto sector may struggle to maintain its previous growth trajectory. Exchanges and other businesses are now lobbying the government to reconsider some aspects of the new tax regime. As debates around optimal tax structures continue, some traders have started routing their transactions to platforms outside Indonesia to avoid the higher domestic levies. However, for most users, the tax changes seem to have significantly reduced the appeal of crypto investing in the nation for now.