South Korea’s ruling party suggests postponing crypto tax to 2028 due to unfavorable sentiment and higher risks.
Proposed 20% tax on crypto gains exceeding 2.5 million won delayed to 2028, down from a 50 million won threshold for stocks.
The Finance Ministry to decide on the proposed crypto tax delay by the end of the month, amidst broader financial tax discussions.
South Korea’s ruling People’s Power Party has proposed postponing the taxation of cryptocurrency gains until 2028. Initially set to take effect on January 1, 2025, this delay is a shift in the country’s approach to crypto regulation.
BREAKING SOUTH KOREA HAVE SUGGESTEDPOSTPONING TAXATION OF CRYPTOGAINS UNTIL 2028.SUPER BULLISH
— Ash Crypto (@Ashcryptoreal) July 15, 2024
Reasons for Delay
The proposal, submitted on July 12, cites unfavorable sentiment toward crypto assets and the higher risks compared to stocks as key reasons for the delay. The party argued that immediate taxation could drive investors away from the market. Initially, the tax plan faced delays since its announcement. Originally set for January 1, 2022, it was postponed to 2023, then 2025, due to backlash from investors and industry stakeholders.
The proposed 20% tax applies to annual gains exceeding 2.5 million won (approximately $1,800), a much lower threshold than the 50 million won (about $36,000) for stock gains. The ruling party, led by President Yoon Suk-yeol, had promised during the April general elections to delay the tax by two years, emphasizing the need for a comprehensive crypto framework before implementing such taxes.
Need for Comprehensive Framework
The party highlighted the necessity of a system to oversee crypto transactions, similar to the stock exchange, which would require about two years to develop. Concerns among crypto investors about the lack of clarity surrounding the proposed tax have contributed to price fluctuations in major cryptocurrencies. This uncertainty has seen daily trading volumes on domestic exchanges drop significantly, adding to worries about the market impact of the tax.
Local media reports indicate that the government had already postponed the tax implementation twice due to criticism from the crypto industry. Some critics argue that the government should have used the three years of preparation time more effectively. The Ministry of Strategy and Finance is expected to announce its position on the proposed delay by the end of the month.
Market Impact
South Korea’s crypto market is one of the largest and most active in the world. Data from Kaiko showed that the Korean won was the most-used fiat currency for crypto trading over the U.S. dollar in early 2024. The proposed delay is part of broader discussions about taxes on financial investments in South Korea, where the government had also considered eliminating the tax on income from financial investments.
Future Steps
South Korea’s proactive approach to crypto regulation emphasizes investor protection and market stability. President Yoon Suk-yeol stressed the need for a clear legal system for cryptocurrencies before implementing the tax. As the July 19th implementation of user protection law approaches, the country aims to ensure transparency and investor safeguards, solidifying its position in responsible crypto adoption.
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