By Michael Scott
The Indonesian government directs all crypto exchanges to register with the national crypto bourse recently unveiled this year. The directive aligns with the government’s objective of utilizing the national crypto bourse to make the digital assets ecosystem safer and simultaneously gather transaction data for tax purposes.
Indonesia Orders Mandatory Registration with CFX for Crypto Exchanges
Indonesia expects compliance from the crypto exchanges operating within its territory to register in the digital assets-specific bourse. The directive is informed by the need to facilitate harmonized monitoring of asset liquidity and tax-oriented harvesting of crypto transactions.
The country unveiled the world’s first global bourse restricted to crypto assets this year. The move coincides with the revelation that Indonesia will host over six million more digital asset traders than conventional stock traders in 2023.
The bourse identified as the Commodity Future Exchange (CFX) matches the operation model utilized in conventional stock exchanges such as the New York-based Nasdaq.
Establishing CFX constitutes the government’s response to the surging demand for digital assets in the country. Official data in 2023 shows the registered crypto traders exceed 18 million relative to stock traders, hovering around 12 million.
Although the stated objective pursued by CFX is to entrench safety into the crypto ecosystem, the bourse will assist the government in tacking crypto-related transactions for tax purposes.
Mechanism for Crypto Exchanges’ Authorization
Indonesia offers a clear-cut process for exchanges to secure authorization to run operations. All digital asset exchanges must seek authorization as per the 2019 regulations by the Indonesian Commodity Futures Trading Supervisory Agency (Bappebti).
Crypto exchanges that have operated in the country since 2014 are classified as “prospective crypto exchanges” since the authorization regime was a subsequent development. Nonetheless, firms must undergo stringent checks for them to secure recognition as legitimate enterprises running under the CFX.
The authorization mandates the crypto exchanges to register with self-regulatory organizations such as the CFX. Nonetheless, the prospective exchange undergoes an assessment conducted by Bappebti to ascertain its fitness to operate.
The crypto asset trade association Aspakrindo chair Robby Bun disclosed that firms meeting all requirements secure a crypto exchange license (PFAK). The chair clarified that Aspakrindo assumes the mediator role between the regulators and prospective crypto exchanges.
Indonesia directs that prospective crypto exchanges that fail to complete the new procedures and seek registrations with CFX should cease to operate. Bun indicated that the prospective crypto exchanges must register by August 17 next year.
Besides, Bun added that the crypto exchanges should obtain licenses. CFX Presiden Direktur echoed the pronouncement by Aspakrindo’s chair that the 29 prospective crypto exchanges should seek authorization or cease operations.
Subani iterated the need for prospective crypto exchanges to exercise diligence in reporting the transactions. The Presiden Direktur emphasized that monitoring is mandatory to guarantee a smooth transition from a prospective to a fully recognized crypto exchange.
CFX Registration for Taxing Crypto
Completing the registration requirement with CFX will offer a gateway for the Indonesian authorities to monitor crypto-related transactions for tax purposes. Bun anticipates that the process will likely feature monitoring liquidity and custodian-targeting asset storage.
Bun expects the CFX to serve as the clearing house where crypto transactions are recorded for tax compliance as obligated in 2019 Bappebti regulations. The chair considered such a while away addition given the existence of challenges to implement the mechanism.
The government’s resolve to mandate registration with CFX hinges on the country’s classifying crypto as commodities. Also, the country is gearing towards a regulatory overhaul in two years, shifting the regulatory purview away from Bappebti to the Financial Services Authority (OJK). The regulatory overhaul would see crypto reclassification as securities.
Bun indicated uncertainty about the role of CFX following the regulatory change, though he expressed optimism that the resulting clarity will benefit crypto traders.
The present classification of commodities since May leaves crypto subject to the value-added tax and income tax (PPh).
Bun considers that the reclassification of crypto into securities will lower the taxes paid. The initiative to remove VAT and impose a lower rate for income tax targets lessening the burden borne by crypto exchanges while paying taxes. Doing so will help Indonesia realize global competitiveness.