The implementation of cryptocurrency taxation, scheduled for January, is at a crossroads for a fourth delay. Despite three previous postponements, discussions continue regarding the growth stage of the cryptocurrency industry and the practicality of the tax system. The ruling party plans to decide on an additional delay within one to two weeks after consulting with major cryptocurrency exchanges.
On October 30, lawmakers from the Democratic Party's Policy Committee and the National Assembly's Finance and Economy Committee held a meeting with CEOs from the five largest domestic cryptocurrency exchanges: Upbit, Bithumb, Coinone, Korbit, and Gopax. The industry is requesting a tax delay, citing the market's structure, which is primarily composed of individual investors, and restrictions on corporate and foreign participation.
As of the end of June this year, there were 11.175 million accounts capable of trading cryptocurrencies in South Korea. Among these, 8.63 million accounts, or 77.2%, held less than 1 million won. The average daily trading volume has decreased by 44% compared to the previous half-year, now standing at 3.1 trillion won. The industry expresses concern that taxation could hinder the competitiveness of the still-growing domestic market.
Equity in taxation is also a key issue. Under current law, starting next year, a 22% tax will be imposed on cryptocurrency capital gains exceeding 2.5 million won annually. However, transactions through overseas exchanges and personal wallets present challenges in tracking acquisition costs and transaction histories, potentially creating tax loopholes. This raises concerns about discrepancies in income assessment between users of domestic and overseas exchanges.
Institutional improvements, such as loss carryforwards, are also seen as necessary. The current cryptocurrency tax system allows for the offsetting of gains and losses within the same tax period, but does not permit annual losses to be carried over to subsequent tax years. This has led to ongoing debates about equity in taxation compared to other investment assets like stocks.
New trading forms, such as stablecoins, also present variables. Unlike in 2020 when the tax system was introduced, the expansion of dollar-based stablecoin trading and discussions on institutionalizing won-based stablecoins have prompted calls to reassess the adequacy of the existing tax framework. Democratic Party lawmaker Oh Gi-hyeong stated after the meeting, "Are we not facing situations that we did not consider when the law was introduced in 2020?" He indicated that additional review of related materials would be conducted.
However, he dismissed claims that taxation would drive away overseas investors. Oh remarked, "Saying that imposing taxes will lead to a migration to the U.S. market is not an appropriate expression," adding that the choice of investment market is fundamentally a matter of returns. He emphasized that concerns about industry competitiveness and the need for a tax delay should be considered separately.
The ruling party has not yet determined its stance on the delay. Oh noted, "The law is already in place," and emphasized the need to assess whether a delay would be appropriate and under what conditions. He added that a decision must be made by the end of November at the latest, with a review of related issues expected to be completed within one to two weeks.
* This article has been translated by AI.
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