Regulation
South Korea Just Moved to Delay a 20% Tax on Cryptocurrency Profits – DL News
- The People Power Party wants to postpone the introduction of a new cryptocurrency until 2028.
- Investors fear that cryptocurrency taxes will be a blow to a fragile market.
- In the first quarter, the Korean won supported $456 billion in cryptocurrency trading.
Lawmakers from South Korea’s ruling People Power Party have proposed delaying the introduction of a 20 percent tax on cryptocurrency trading profits until 2028.
THE proposalunveiled last week, comes at a time when there are fears that a rapid imposition of taxes could drive Korean investors away from a cryptocurrency market already plagued by negative sentiment.
The proposed tax rules would require investors to pay a high tax on annual earnings above 2.5 million won (about $1,800).
In stark contrast, the capital gains tax on stock trading in South Korea only applies to profits above 50 million won (about $36,000). The discrepancy has drawn considerable criticism from the cryptocurrency community.
Debate on fiscal policy
After rising 65% in the first quarter, Bitcoin is down 9% since March 31 in a market battered by macroeconomic forces and supply peaks.
The debate over this tax policy has led to multiple delays to its planned introduction in 2021.
As part of its election campaign earlier this year, the center-right People Power Party pledged to postpone the tax’s implementation by two years.
This is in line with their broader strategy to support the digital asset market while establishing a comprehensive regulatory framework.
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Despite its relatively small population of just under 52 million, South Korea exerts significant influence on the global cryptocurrency market.
In the first quarter of this year, the Korean won facilitated a cryptocurrency trading volume of $456 billion, overcoming the $455 billion traded using the U.S. dollar.
The proposed tax extension is part of a broader set of regulatory measures aimed at limiting potential excesses and ensuring market stability.
VASP Law
Later this week, South Korea will launch its Virtual Asset User Protection Act. The legislation requires virtual asset service providers, or VASPs, to separate user deposits and virtual assets from their own holdings, while also introducing measures to combat unfair trading practices.
The government is also laying the groundwork for a comprehensive digital asset regulatory framework, designed to impose greater oversight on the virtual asset services sector.
Callan Quinn is DL News Asia Correspondent based in Hong Kong. Contact us at callan@dlnews.com.