Binance has officially weighed in on Vietnam’s new tax plans. In a formal letter to the Ministry of Finance, the company has asked the government to think carefully about how it taxes a special group of high-volume traders called “market makers,” arguing that getting this right is essential to keeping the Vietnamese crypto market healthy and active for everyone.
The Crucial Role of Market Makers and Risks of a Transaction-Based Tax
Think of market makers as the corner store owners of the crypto world. They are always ready to both buy and sell a particular crypto asset, ensuring there’s always a fair price available. You can trade whenever you want without causing a huge price swing. In its proposal, Binance stressed that these players are essential for a stable market.
Source: Binance
The core problem, Binance warned, is with a plan to tax the total value of every transaction. This would be like taxing a grocery store on its total revenue for the day instead of just its final profit. For market makers, whose profit on a single trade might be as tiny as 0.01%, a 0.1% tax on the total transaction value would be devastating.
If these market makers are forced to leave, the price difference between buying and selling would get much bigger, making crypto trading more expensive and volatile for regular investors. Binance pointed to Indonesia, where a similar tax saw crypto tax income actually drop by 63% because it scared away so much trading activity.
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Binance’s Proposed Framework: A Net Profit Approach
So, what’s Binance’s solution? They are suggesting a much fairer “tax what you actually earn” system, very similar to how stock market investments are taxed. Instead of taxing the total sale amount, the government would only tax the actual net profit a person makes (what they sold an asset for, minus what they originally paid for it and any fees).
Source: Blockbit
The exchange suggested a 20% tax rate be applied to this net profit. And for situations where it’s too complicated to figure out the exact profit, they proposed a simple backup plan: a tiny 0.1% tax on the total sale price.
Support from Industry Experts and Academia
Binance isn’t alone in this thinking, as the proposal has received support from local financial specialists. Dragon Capital, a major investment fund in Vietnam. They agreed that giving market makers conditional, short-term tax breaks is a good idea. An expert from RMIT University also called the idea “reasonable” to help attract liquidity in the market’s early days, suggesting a “start with no tax, then tax the profits later” approach would work well.
How Do Other Countries Tax Crypto?
Looking around the region shows that countries are taking very different approaches, offering valuable lessons for Vietnam.
- Indonesia (A Warning Example): Indonesia implemented a small transaction fee (0.1% income tax and 0.1% VAT). While market makers are exempt, the measure was ultimately counterproductive. Rather than increasing revenue, total collections related to cryptocurrency tax dropped significantly, suggesting taxing transactions will reduce trading activity in total.
Source: Binance
- Singapore (The Growth-Oriented Approach): Singapore is the most recognized jurisdiction by individuals as one of the most crypto-friendly. Long-term holders are not imposed capital gains tax when selling their crypto while traders (professional traders like market makers) are taxed on their profits as ordinary business income. This system draws the distinction between everyday investors and providers of liquidity.
Source: CoinLedger
- Thailand (The Flexible Approach): Thailand shows how a government can react based on industry feedback. Initially, the government offered a firm percentage of tax on crypto profits (15%). However, after significant pushback from industry stakeholder. They brokered a more reasonable stance— in fact, removed the 7% VAT for trades. Made through licensed exchanges to encourage growth in the domestic market for crypto.
