Indonesian crypto exchanges lose 72%! It loses $1.1 billion in tax revenue a year

72% of licensed cryptocurrency exchanges in Indonesia lost money, with 2,000 users. The transaction volume fell from 650 trillion to IDR 482 trillion (300 billion US dollars). Users VPN flee to overseas platforms to get low fees, fast cash withdrawals, and tax exemptions. Indodax hacker lost IDR 600 million to trigger investigation. In January 2025, the OJK took over regulation and issued 29 licenses, intensifying involution.

The paradox of 72% exchange losses in the $300 billion market

! [Indonesian cryptocurrency exchange losses] (https://img-cdn.gateio.im/webp-social/moments-87a9b3933a-f406644b10-8b7abd-e2c905.webp)

The Indonesian Financial Services Authority (OJK) reported that about 72% of licensed cryptocurrency exchanges in the country were still in the red by the end of 2025, despite the number of crypto users exceeding 2,000. These data highlight a structural challenge: the user base is growing, but users are increasingly leaning towards overseas platforms, making it difficult for domestic exchanges to compete with them.

According to OJK data quoted by local media, total cryptocurrency transactions will fall to IDR 482.23 trillion (around US$300m) in 2025, down from IDR 650 trillion in 2024, a decrease of 26 percent. OJK attributes this to Indonesian investors increasingly trading through regional and global platforms rather than domestic exchanges. This separation of “users at home and transactions overseas” is the core dilemma faced by Indonesian cryptocurrency exchanges.

What is the concept of 2,000k users? Indonesia has a total population of about 2.7 billion, meaning that about 7.4% of the population holds or trades cryptocurrencies. This penetration rate is second only to Vietnam and the Philippines in Southeast Asia, indicating that Indonesia is one of the most important crypto markets in the world. However, such a large user base does not translate into profits for local exchanges, with a 72% loss rate exposing fundamental flaws in the business model.

Indodax CEO William Sutanto said the outflow stemmed from traders seeking a more competitive trading environment overseas. Sutanto said: “Indonesia already has a large number of cryptocurrency users, but domestic transaction volume is not ideal because most of the transaction activity goes to the global ecosystem. The market will look for markets with higher execution efficiency and more competitive costs.” This candid admission sheds light on the disadvantages of local exchanges in global competition.

He pointed out that there is currently an uneven playing field: domestic Indonesian exchanges bear the tax and compliance burdens that foreign platforms serving Indonesian users do not need to bear. Indonesian investors can still access overseas exchanges through VPNs, while deposits are processed through local banks. “The foreign exchange market does not have the same tax and compliance burden as the domestic market, but Indonesian investors can still participate in it.” Sutanto noted.

Users vote with their feet: VPNs flee to Binance

In an interview with BeInCrypto, Indonesian crypto users cited several reasons why they prefer overseas platforms: lower costs, faster withdrawals, and security risks that still exist after Indodax’s 2024 hack. “Withdrawals over $1,000 from local exchanges require a lot of paperwork, but P2P transfers from global exchanges can be received in less than a minute.” One user said.

Five reasons why Indonesian users choose overseas exchanges

Lower transaction fees: Global platforms such as Binance have a fee of 0.1%, and local exchanges usually have a fee of 0.3%-0.5%

Faster withdrawals: P2P withdrawals on overseas platforms will arrive in minutes, and local transactions will take 1-3 days and exceed $1,000 will need to be reviewed

Tax-free advantages: Indonesia imposes a 0.1% transaction tax and capital gains tax on local exchange transactions, which overseas platforms do not have to pay

The currency is richer: The global platform supports hundreds of currencies and leveraged contracts, and there are only a few dozen local exchanges

Better liquidity: The global platform has deep trading depth, small slippage for large orders, and poor liquidity on local exchanges

This loss of users is a fatal blow to local exchanges. When trading volume is concentrated on overseas platforms, local exchanges’ revenue (mainly from transaction fees) drops sharply, but fixed costs (such as employee salaries, compliance expenses, system maintenance) remain unchanged, and losses become inevitable. To make matters worse, low trading volumes lead to further deterioration in liquidity, creating a vicious cycle.

The widespread use of VPNs makes regulation virtually useless. While the Indonesian government requires local exchanges to enforce strict KYC and tax declarations, it cannot prevent users from accessing Binance or Bybit through VPNs. Although these overseas platforms do not have physical entities in Indonesia, they can seamlessly serve Indonesian users through P2P trading and cryptocurrency transfers. This “regulatory arbitrage” is a global phenomenon and is not limited to Indonesia.

The Indodax hack exacerbated the crisis of trust

These challenges come as Indodax itself faces scrutiny. The Indonesian Financial Services Authority (OJK) is currently investigating reports of the disappearance of around Rp6 billion (around US$38,000) of customer funds. Although Indodax blamed the losses on external factors such as phishing and social engineering rather than system vulnerabilities, the case highlights the trust issues that domestic exchanges must overcome to retain users.

The loss of $38,000 may seem like a small amount, but for a market with fragile trust, any security incident is fatal. Indodax has suffered a larger hack in 2024, and although the official amount of losses has not been officially announced, the community estimates it could reach millions of dollars. This frequent security incident has caused user confidence in local exchanges to drop to freezing points.

In contrast, global platforms such as Binance have a “Security Fund” (SAFU) that promises to compensate users for losses caused by security breaches. Although this mechanism cannot completely eliminate hacking attacks, it at least provides users with protection. Indonesia’s local exchanges lack similar capital reserves and compensation mechanisms, and users can only consider themselves unlucky in the event of an accident.

Sutanto called for continued enforcement actions against illicit foreign platforms while working towards a healthier domestic ecosystem, adding that collaboration between regulators and industry players is crucial. However, enforcing the law is extremely difficult. The government can block Binance’s domain name, but users can bypass it through a VPN; Banks can be asked to prohibit transfers to overseas exchanges, but users can deposit and withdraw funds with cryptocurrencies. This dilemma of “one foot high and one foot high” makes the regulatory effect limited.

29 licenses intensified the death spiral of involution

On January 10, 2025, the Indonesian cryptocurrency market underwent a significant regulatory change, with regulatory authority transferred from the Commodity Futures Trading Supervisory Authority (Bappebti) to the Financial Services Authority (OJK). The regulator broke the original single exchange pattern by issuing new licenses. However, now that 29 licensed exchanges are vying for the limited domestic market, profit pressures are intensifying.

29 exchanges compete in a market with an annual trading volume of $300 billion, with an average trading volume of only about $1 billion each. If calculated at a 0.3% fee rate, the annual revenue of each exchange is only about $300. After deducting employee salaries, system maintenance, compliance costs, and marketing expenses, most exchanges are not profitable at all. This excessive competition is the result of regulatory policy mistakes, and OJK should have limited the number of licenses to ensure the healthy development of the industry, rather than “issuing licenses” that caused industry-wide losses.

To add insult to injury, global companies are entering the market directly. Robinhood announced its plans to acquire Indonesian brokerage PT Buana Capital Sekuritas and licensed crypto trader PT Pedagang Aset Kripto in December last year. This means that Robinhood will be eligible to operate legally in Indonesia, and with its global brand and technological advantages, it may further squeeze the living space of local exchanges.

In addition to licensed global competitors, unlicensed platforms are eating into market share. They are estimated to cause Indonesia between $7,000 and $1.1M in tax losses each year. These unlicensed platforms rob users of both users and government taxes, creating a “triple loss” situation: local exchanges lose money, government tax revenue is lost, and users face unguaranteed risks.