South Korean Authorities Considering Delaying Implementation of Cryptocurrency Capital Gains Tax Until 2028: Concerns of Investors Exiting the Market

According to South Korean media Hanguk Kyungjae, the country's right-wing party has proposed a 3-year delay in implementing the tax system for cryptocurrency income until 2028, citing concerns that investors may withdraw from the market as a result. Previously, the implementation of this tax system has been postponed twice.

South Korea's Liberty Korea Party Proposes Postponing Implementation of Cryptocurrency Capital Gains Tax

According to data from the National Assembly website in South Korea, the right-wing political party Liberty Korea Party proposed last Friday, the 12th, to delay the implementation of cryptocurrency capital gains tax for 3 years, from early 2025 to 2028.

The proposal states that the law would classify income generated from the transfer or sale of virtual assets as other income to promote fair taxation between cash, real estate, and virtual assets such as cryptocurrencies:

However, due to the high-risk nature of virtual assets, with loss risks higher than regular assets, and the investment sentiment in the current virtual asset market gradually deteriorating, if income tax is imposed, it is expected that most investors will exit the market.

It further adds, "Therefore, the implementation of the virtual asset income tax scheduled to start on January 1, 2025, may be postponed for 3 years until January 1, 2028."

It is reported that the virtual asset income tax system was introduced in December 2020, originally scheduled to be implemented starting in 2022, but was postponed due to the need to establish supporting measures and strong opposition from investors and industry professionals.

In February of this year, the ruling Liberty Korea Party, led by current President Yoon Suk-yeol, once again promised to postpone the cryptocurrency profit tax, citing concerns about burdening investors and causing market chaos.

South Korea's Ruling Party Plans to Postpone Crypto Tax, as Promised in April Parliamentary Elections

Now, the implementation of the tax system seems indefinitely postponed.

South Korean Ministry of Economy and Finance: Postponement Not Yet Decided

However, according to local media Bloomingbit reports, the South Korean Ministry of Economy and Finance has not yet made a decision on the matter:

We have not made a decision on the postponement of the implementation of income tax on virtual assets and cryptocurrencies.

It is reported that the authorities are expected to announce new tax law amendments by the end of this month, where detailed explanations on this matter may be publicly disclosed.

Hanguk Kyungjae, in its report, suggests that the further postponement of the crypto tax regime may be inevitable:

More than half of cryptocurrency investors are in their 30s to 40s, and their opinions carry significant weight. Almost all politicians are aware of this.

South Korea's Active Cryptocurrency Market

As one of the largest and most active cryptocurrency markets in Asia, South Korea has long been known as the "kingdom of altcoin trading."

According to the Financial Services Commission (FSC) of South Korea's survey report on the domestic cryptocurrency market in the second half of 2023, the total trading volume that year reached $4.8 billion, with the number of cryptocurrency users reaching 6.45 million, accounting for approximately 12.9% of the country's population.

Not Willing to Lose to South Korea! FSC: 6.45 Million Crypto Asset Users, 70% Investing Less Than $800

In response, the South Korean Cabinet approved the Enforcement Decree of the "Virtual Asset User Protection Act" last month, which will come into effect on July 19, clearly defining virtual assets, how user assets are stored, monitoring unfair transactions, and disclosure of non-public important information, providing detailed regulations.

South Korea Approves Virtual Asset User Protection Act: 70% of Exchanges Use Cold Wallets, Insider Trading to Face Criminal Charges