South Korea Considers Delaying Crypto Tax to 2028 Amid Market Concerns

South Korea’s ruling People Power Party has proposed postponing the implementation of cryptocurrency gains tax from January 2025 to January 2028, marking a potential seven-year delay from the original 2021 schedule. This move comes amid concerns over negative market sentiment and the need for a comprehensive regulatory framework.

The proposal, submitted on July 12, argues that rapidly imposing taxes on virtual assets is “not advisable at this time” due to deteriorating sentiment toward crypto assets. The party contends that with crypto having higher risks than stocks, investors are likely to exit the market if income tax is imposed prematurely.

Initially set to take effect in 2022, the 20% tax on crypto gains exceeding 2.5 million won (approximately $1,800) has already been postponed twice. The current proposal aligns with President Yoon Suk-yeol’s campaign promises to delay crypto taxation and prioritize establishing a clear regulatory framework.

The Ministry of Economy and Finance, however, has not yet made a decision on additional delays. The ministry is expected to announce new amendments to the tax code by the end of July.

South Korea’s crypto market remains one of the world’s largest and most active. According to the Financial Services Commission, about 6.5 million citizens, or 12.5% of the population, used crypto as of late 2023. In the first quarter of 2024, the Korean won surpassed the US dollar as the most-used fiat currency for crypto trading, according to data from Kaiko.

The proposed delay reflects ongoing challenges in balancing taxation with market growth. Critics argue that hasty implementation could drive investors away, while proponents emphasize the need for regulatory clarity. The ruling party believes that a two-year grace period is necessary to establish proper oversight and systems for the crypto market.

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