The South Korean cryptocurrency market is set to experience a significant shift as the country’s right-wing political party has proposed delaying the taxation of cryptocurrency gains by three years. If the proposal is passed, the crypto gains taxation, initially scheduled to take effect on January 1, 2025, will now be pushed back to 2028.
“As at the moment, the investor sentiment for crypto is negative, most investors are expected to leave the market if the country imposes an income tax on an asset that has higher risks than stocks,” the bill’s description on the South Korean National Assembly’s website stated.
The proposed delay comes after previous pushbacks of the crypto gains tax, which was initially scheduled to begin on January 1, 2022, but has been postponed twice due to heavy backlash from investors and industry experts.
Cryptocurrency’s Importance in South Korea
South Korea is home to one of the world’s largest and most active cryptocurrency markets. As of the end of last year, around 6.5 million citizens, which accounts for 12.5% of the country’s population, used crypto. In the first quarter of 2024, the Korean won was the most-used fiat currency for crypto trading over the U.S. dollar, according to Kaiko data.
Government’s Stance on Crypto Taxation
The South Korean government’s Ministry of Economy and Finance has not yet made a decision on additional delays in the crypto tax. The ministry is scheduled to announce new amendments to the tax code at the end of this month.
The right-wing People Power Party, in which the current President Yoon Suk-yeol is based, had pledged in the last general election to push back the crypto gains tax. The party’s latest proposal to delay the taxation until 2028 reflects the government’s efforts to balance the needs of the cryptocurrency industry and investors with the desire to regulate the market.
As the South Korean government continues to navigate the complexities of crypto taxation, the proposed delay highlights the country’s recognition of the importance of the digital asset ecosystem and the potential impact of premature taxation on investor sentiment and market participation.
