South Korea's ruling People's Power Party has proposed delaying the implementation of a 20% tax on cryptocurrency trading profits until 2028.
The proposal, introduced last week, comes amid concerns that a rapid implementation of taxes could alienate Korean investors from a crypto market already plagued by negative sentiment.
The proposed tax rules would require investors to pay a high tax on earnings exceeding 2.5 million won (about $1,800) annually. This is in stark contrast to the capital gains tax on stock trading in South Korea, which applies only to profits exceeding 50 million won (about $36,000). This discrepancy has drawn significant criticism from the crypto community.
Bitcoin, which rose 65% in the first quarter, has fallen 9% since March 31 in a market shaken by macroeconomic forces and spikes in supply. Controversy over this taxation policy has led to numerous delays since its implementation, which was scheduled to come into force in 2021.
As part of its election campaign earlier this year, South Korea's centre-right People Power Party promised to delay the implementation of the tax for two years.
Despite its relatively small population of just under 52 million, South Korea has a significant influence on the global crypto market. In the first quarter of this year, the Korean won brokered $456 billion in crypto trading volume, surpassing the $455 billion traded using the US dollar.
The proposed tax deferral forms part of a broader package of regulatory measures aimed at curbing potential excesses and ensuring market stability. Later this week, South Korea will enact the Virtual Asset User Protection Act. The legislation forces virtual asset service providers, or VASPs, to separate user deposits and virtual assets from their assets, while also introducing measures to combat unfair trading practices.
*This is not investment advice.