South Korea proposes three-year delay for cryptocurrency taxation
South Korea’s right-wing political party has proposed delaying the taxation of cryptocurrency gains by three years.
If the proposal is approved, the implementation of the crypto gains tax will be postponed from the beginning of 2025 to 2028.
The bill is detailed on the South Korean National Assembly’s website, which notes that current negative investor sentiment towards cryptocurrency could lead to market exits if an income tax is imposed on this high-risk asset.
Initially, a 20% tax on crypto gains was scheduled to take effect on January 1, 2022. However, it has already been postponed twice due to significant opposition from investors and industry experts, with the new effective date set for January 1, 2025.
During the last general election, The People Power Party promised to delay the crypto gains tax. Local news reports indicate that the Ministry of Economy and Finance has not yet decided on further delays but is expected to announce new tax code amendments at the end of this month.
South Korea’s crypto market
South Korea is home to one of the world’s largest and most active cryptocurrency markets. As of the end of 2023, approximately 6.5 million citizens, or 12.5% of the population, were involved in cryptocurrency, according to the Financial Services Commission. In the first quarter of 2024, the Korean won was the most-used fiat currency for crypto trading, surpassing the US dollar, based on data from Kaiko.
The country hosts several prominent cryptocurrency exchanges, including Upbit, Bithumb, Coinone, and Korbit. Upbit, the largest exchange by volume, accounted for over 50% of the total market share in 2023. These exchanges have been pivotal in facilitating crypto trading for both retail and institutional investors.
Recent trends indicate a growing interest in decentralized finance (DeFi) and non-fungible tokens (NFTs) among South Korean investors. In 2023, the trading volume of DeFi tokens saw a 40% increase compared to 2022, reflecting the global surge in DeFi popularity. NFTs also gained traction, with several Korean artists and entertainment companies launching successful NFT projects.
With the active market, the regulatory environment has been evolving. The South Korean government has implemented measures such as mandatory real-name verification for crypto traders and stricter reporting requirements for exchanges to combat money laundering and ensure investor protection.
The vibrant cryptocurrency market significantly impacts the South Korean economy. Cryptocurrencies have become an important asset class for many investors, contributing to the diversification of investment portfolios. However, the market’s high volatility poses risks, particularly for retail investors who may be less equipped to handle significant price fluctuations.
