South Korea’s People’s Power Party has recently made headlines with its official proposal to delay the country’s impending cryptocurrency trading profits tax. Initially set to commence on January 1, 2025, the proposal now seeks to push this date back to January 1, 2028.
Current Market Sentiment and Proposal Justification
On July 12, the party formally submitted its proposal, citing the deteriorating sentiment towards cryptocurrencies as a key reason. The prevailing opinion within the party is that the swift imposition of taxes on virtual assets under current market conditions is ill-advised. They argue that the inherently higher risks associated with cryptocurrencies, compared to traditional stocks, could lead investors to exit the market if additional taxes were imposed.
This move aligns with the promises made by the People’s Power Party ahead of the general elections in April. They pledged a two-year delay in the implementation of the tax on crypto gains as part of their campaign platform.
On February 19, the party articulated that the country needs a comprehensive framework for cryptocurrency regulation before proceeding with taxation. They stressed that taxation should only commence once this foundational framework is fully operational.
Oversight and Regulatory Framework
Unlike traditional stock exchanges, there are currently no entities mandated to oversee transactions in crypto assets. The party believes that it is necessary to spend two years developing this type of regulatory system to ensure adequate oversight and secure transactions within the cryptocurrency market.
Originally, the plan to tax cryptocurrency gains in South Korea was set to begin in 2021. However, due to significant pushback from industry leaders and stakeholders, the implementation was first delayed to 2023 and then further postponed to 2025, amidst concerns about protecting investor interests.
Potential Impact of the Seven-Year Delay
If the new proposal is accepted, it will result in a near seven-year delay from the original implementation schedule. This section of the report was highlighted by local media outlet The Korea Economic Daily, which has closely followed the developments.
In the current regulatory landscape, South Korean investors are required to pay a 20% capital gains tax if their annual gains from cryptocurrencies exceed 2.5 million won (approximately $1,800). This threshold is notably lower than that for stocks, where taxes are levied only on gains exceeding 50 million won (about $36,000). This disparity has raised concerns among cryptocurrency investors and stakeholders about the fairness and feasibility of the proposed tax structure.
| Asset Type | Tax Threshold (won) | Tax Threshold (USD) |
|---|---|---|
| Cryptocurrencies | 2.5 million | $1,800 |
| Stocks | 50 million | $36,000 |
The proposal by South Korea’s ruling party to delay the taxation of cryptocurrency gains reflects broader uncertainties and the volatile nature of the cryptocurrency market. As the government contemplates this significant regulatory adjustment, the global and local crypto communities will be watching closely, considering both the economic implications and the broader impact on digital currency adoption within the country.
