- South Korea’s ruling People Power Party has proposed a delay on the 20% tax on cryptocurrency trading profits until 2028.
- The proposal highlights concerns that immediate tax implementation could deter Korean investors from an already volatile crypto market.
- Critics have noted the proposed rules require taxes for gains exceeding 2.5 million won (~$1,800), contrasting sharply with the capital gains tax on stock trading, which only applies to profits exceeding 50 million won (~$36,000).
Discover why South Korea wants to delay the 20% crypto trading tax until 2028 and how it affects the global crypto market.
South Korea Proposes Crypto Tax Delay Amid Market Concerns
The South Korean government, led by the People Power Party, has presented a proposal to postpone the imposition of a 20% tax on cryptocurrency trading profits until 2028. This move comes against a backdrop of apprehensions that hastily implemented tax regulations may drive Korean investors away from an already troubled crypto market, potentially exacerbating existing challenges.
A Comparison with Stock Trading Tax Obligations
Under the proposed tax rules, investors will be required to pay taxes on gains exceeding 2.5 million won (approximately $1,800) annually. This requirement starkly contrasts with the capital gains tax on stock trading in South Korea, which only applies to profits exceeding 50 million won (roughly $36,000). Such a discrepancy has sparked significant criticism from the crypto community, which perceives the tax structure as unfair and excessively burdensome.
Bitcoin’s Volatility and Market Reactions
Amid these tax discussions, Bitcoin’s price has experienced notable fluctuations. After rising by 65% in the first quarter of the year, Bitcoin has seen a 9% decline since March 31, influenced by macroeconomic forces and sudden increases in supply. The ongoing debates about crypto taxation have contributed to a series of delays in the policy’s implementation, which was initially scheduled to come into effect in 2021.
Impact of the Tax Delay on South Korea’s Crypto Market
During the recent election campaign, the center-right People Power Party had committed to postponing the tax imposition by two years if elected. South Korea, despite its relatively small population of just under 52 million, holds a significant position in the global crypto market. The first quarter of this year saw considerable activity, with the Korean won facilitating a staggering $456 billion in crypto trading volume, surpassing the transaction volumes conducted using the USD.
Comprehensive Regulatory Measures for Market Stability
The suggested tax delay is part of a broader set of regulatory measures aimed at curbing market excesses and ensuring stability. This week, South Korea plans to enact the Virtual Asset User Protection Act. This legislation will mandate virtual asset service providers (VASPs) to segregate user deposits and virtual assets from their own holdings, while also implementing measures to combat unfair trading practices.
Conclusion
The proposal to delay the 20% tax on crypto trading until 2028 highlights the South Korean government’s cautious approach towards regulating a volatile market. The initiative aims to balance regulatory oversight with market stability, ensuring investor confidence while addressing the criticisms from the crypto community. As South Korea moves forward with comprehensive regulatory frameworks, the global crypto market will be closely watching the impact of these developments.
