Bitrabo Editorial
Recent reports suggest that the South Korean government is contemplating a third delay in implementing taxation on crypto gains. This delay comes in response to mounting concerns among investors in the country who are troubled by a lack of clarity in the system leading to market confusion.
Cryptocurrency Taxation Deferral Extended
A local media outlet reported that lawmakers in South Korea are proposing to further postpone the enforcement of crypto taxation in the country. Initially, a 20% tax on cryptocurrency gains was set to be implemented by January 2022.
This rule has already been delayed twice, with the most recent extension pushing the enforcement date to January 2025. Should the new bill, put forward by the ruling party in South Korea, be approved, the implementation of the crypto tax could be deferred to 2028, marking a six-year delay from the original deadline.
The initiation of taxing cryptocurrency profits was scheduled for October 2021 after the National Assembly passed the relevant tax legislation during the Moon Jae-in administration. Due to the presidential election scheduled for the following year, the enforcement date was pushed to January 2023, and subsequently to January 2025 under the Yoon Seok-yeol administration.
The primary reasons for these delays stem from concerns over the burden on cryptocurrency investors and the resulting market uncertainty. Concerns have been raised regarding the lack of clarity, with complaints about the tax regulation escalating alongside the market retracement.
Reports indicate a significant decline in crypto trading volume since Q1 2024, with trading figures plummeting from approximately 20 trillion won (equivalent to $14.5 billion) in March to 2 trillion won in recent times.
Concerns are mounting that if the taxation of cryptocurrency profits commences early next year, daily trading numbers could witness a further decline. Many believe that with the implementation of the tax law, the majority of investors may exit the market, leading to a further decrease in trading activities.
Further Deferral Risking Nullification of Tax Law
By the end of 2023, nearly 6.5 million individuals had invested in cryptocurrencies in South Korea, with over half of these domestic investors falling within the age brackets of 30s and 40s, as per the Financial Services Commission.
Politicians are taking a keen interest in crypto investors as individuals within this age group represent half of the country’s population. The involvement of this demographic holds considerable weight in public opinion, according to the report.
Despite this, some Koreans have criticized the government’s decision to postpone the tax policy, viewing the country’s tax laws as overly influenced by the taxpayers’ public opinion.
Opponents reject claims of an inadequate system and system maintenance for effective crypto tax regulation. They argue against the latest extension, pointing out that the government has had three years to prepare, having already deferred the tax law twice:
“The government’s claim of a ‘lack of readiness’ to delay taxation once more is not justifiable. It implies a lack of proactive action.”
Many express concerns that a third postponement of the crypto tax could render the law void, suggesting that the same arguments used for the delay could resurface in the context of the 2028 elections.
The Ministry of Strategy and Finance has stated that “no decision has been reached regarding a further extension of virtual asset taxation.” A final decision is expected before the end of the month.