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Indonesia Considering New Framework Around Crypto Assets

Cryptocurrencies are probably the most talked-topic right now across the world. Ocence hailed as the future of finance are still controversial. In Indonesia, crypto assets are gaining traction. Between January and May of this year, more than 6.5 million people bought or sold cryptocurrencies, according to the Ministry of Trade.

Despite being the largest economy in Southeast Asia prohibits, it prohibits the use of cryptocurrencies as a payment instrument but allows them to be traded as a commodity. In February 2019, Indonesia legalised the trading of bitcoin and crypto-assets as commodities. There are currently 13 licenced crypto marketplaces and 229 different types of crypto assets that can be legally traded.

The number of crypto investors has now exceeded that of stock traders, which reached 2.2 million in March of this year, according to the Indonesian Stock Exchange. Cryptocurrency assets have surpassed stocks as the most popular investment class in the country. Currently, 229 legal cryptocurrencies, including Bitcoin, can be traded on 13 platforms registered with the Futures Exchange Supervisory Board of the Ministry of Trade.

OpenGov Asia reported that Deputy Minister of Trade Jerry Sambuaga acknowledged that the development of the commodity market is complex, especially for the rapid growth of crypto-assets that requires the presence of regulatory tools and institutions that protect them.

The Head of the Fiscal Policy Agency, the Director-General for Financing and Risk Management and the Deputy Minister of Finance agreed on the increasingly complex development of the commodity market. There are matters of concern ranging from taxation to the impact on the national economy at large.

Recently, Indonesia is considering a move to tax cryptocurrency trades after a surge in local investor interest. The country has been searching for ways to boost state revenues in the face of the coronavirus pandemic, though a spokesman for Indonesia’s tax office said a cryptocurrency tax scheme was still being discussed.

A crypto exchange platform that claims to be the largest in Indonesia, said by April this year, the number of active members on its platform hit three million as the price of Bitcoin and other crypto-assets reached record highs. The membership has increased from around 2.3 million at the start of the year. Cryptocurrencies have been rallying in recent weeks, with some smaller ones, such as Dogecoin, increasing by more than 700% in the last month.

Cryptocurrency mining and staking income is ordinary income for tax purposes. Cryptocurrency mining, and its staking counterpart, is a service that computers provide to a cryptocurrency blockchain network. The owners of these computers typically receive cryptocurrency from the network in exchange for their services. For instance, if a person owns a computer that performs cryptocurrency mining or staking, that person would typically receive cryptocurrency in exchange for these services and would pay tax on that cryptocurrency to the IRS. The payment in cryptocurrency is taxable income, just as if the person had been paid in dollars to perform the same services for the network.

Some people trade cryptocurrencies for profit. Trading crypto is very similar to trading stocks and other securities, so many of the same tax rules apply. Crypto traders must pay capital gains taxes on the profits they earn.

In a context of political or economic instability, or amid fears related to currency debasement, cryptocurrency constitutes a relatively safe asset. Thus, while for consumers from developed economies crypto is a largely speculative investment, for some investors in emerging economies it constitutes a more reliable option than traditional currency.

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