South Korea’s Democratic Party recently reached an agreement to delay the implementation of crypto taxation laws, providing a temporary reprieve in the ongoing debate over digital asset regulation in the country. The decision to postpone the taxation of crypto profits for two years was announced by Democratic Party floor leader Rep. Park Chan-dae during a press conference. This move comes as a relief to the approximately 10 million people in South Korea who are actively engaged in crypto trading and investment.
Despite the high level of adoption of cryptocurrencies in South Korea, the country has taken a cautious approach to regulating the industry. The average daily crypto trading volume in the nation is estimated to be around 11.3 trillion won ($8.4 billion), often surpassing that of the Korea Composite Stock Price Index (KOSPI), the country’s main stock exchange.
The crypto tax law, which was initially set to take effect in January, imposes a tax on digital asset income. The agreement to delay its implementation aligns closely with a government proposal, although the ruling People Power Party had initially sought a three-year moratorium. The Democratic Party has agreed to a shorter two-year delay but has also vowed to oppose new tax cuts for inheritances and gifts, arguing that they disproportionately benefit the wealthy.
This agreement marks a shift in the Democratic Party’s stance on the issue, as they had previously advocated for raising the threshold for crypto-related tax deductions rather than postponing the law altogether. Despite conceding on the crypto taxation issue, Park emphasized his party’s opposition to proposed reforms to inheritance and gift taxes, including plans to lower the top inheritance tax rate and increase the deduction threshold for assets passed from parents to children.
The discussions around tax policies in South Korea come amidst broader debates on the country’s fiscal policies. Last month, Democratic Party leader Rep. Lee Jae-Myung reversed course on a proposed tax on financial investment income, opting to support its repeal in order to revitalize the country’s stock market and address concerns from millions of investors.
While the delay in implementing crypto taxation provides temporary relief to digital asset traders, it also raises questions about the government’s ability to balance competing fiscal priorities. The decision reflects the complexities and challenges associated with regulating the rapidly evolving cryptocurrency market in South Korea.