As the implementation of cryptocurrency taxation approaches in January, there are calls to reassess the entire system, including the timing of the tax. Concerns have been raised that enforcing taxation without a solid institutional foundation could lead to market confusion and stifle the industry.
The People Power Party and the Digital Asset Exchange Joint Council (DAXA) held a policy meeting on improving the digital asset taxation system on September 21 at the National Assembly in Yeouido, Seoul. The meeting was attended by Jung Jeong-sik, the party's floor leader, and other key members, along with representatives from the five major Korean won exchanges.
The government plans to classify income from the transfer or lending of cryptocurrencies as other income starting next year. A basic deduction of 2.5 million won will be applied to annual cryptocurrency income, with a 20% tax rate on the excess. Including local income tax, the total rate will be 22%. Originally scheduled for implementation in 2022, the taxation was postponed multiple times due to the need for infrastructure and investor protection measures, now set to take effect in January.
During the meeting, participants emphasized the need to first establish related systems and infrastructure before implementing taxation. They argued that rushing into taxation without adequate preparation could exacerbate market turmoil.
Jung, in his opening remarks, stated, "With just a few months until implementation, we must carefully examine whether a fair and accurate taxation system for digital assets is in place. If we impose taxes without sufficient preparation, the burden will fall on young investors who are already facing challenges."
Oh Se-jin, CEO of Digital X and DAXA chair, noted, "Cryptocurrency taxation has faced several delays, but various opinions regarding income classification and taxation infrastructure continue to arise. Given the ongoing debates, institutional improvements are necessary as we approach next year's implementation."
There were also calls to reassess the equity of taxation across different asset classes. With the abolition of the financial investment income tax, questions were raised about whether it is fair to impose taxes solely on cryptocurrency investment income.
Another point of contention was how to determine the acquisition cost of cryptocurrencies that enter domestic exchanges via overseas exchanges or personal wallets. Participants suggested that clearer taxation standards for new transaction types beyond simple buying and selling should be established.
Additionally, attendees expressed concern that implementing taxation amid ongoing difficulties in the cryptocurrency market could accelerate the movement of investors to overseas exchanges.
After the meeting, People Power Party lawmaker Choi Soo-jin pointed out in a background briefing that, while efforts are underway to attract foreign investment through various reforms, such as single-stock leveraged exchange-traded funds (ETFs), cryptocurrency taxation could paradoxically lead to capital outflows.
* This article has been translated by AI.
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