Markets
Korean crypto community warns that 20% tax on profits could devastate the market
South Korea’s cryptocurrency community is alarmed that a 20% tax on cryptocurrency gains will scare away investors and could ruin the market.
As South KoreaAs a 20% tax on crypto gains looms, the local crypto community is voicing concerns, saying the controversial tax will force investors out of the market. South Korea’s Ministry of Economy and Finance is planning to impose a 20% tax on the amount that exceeds the basic deduction of 2.5 million won (about $1,800), plus an additional 2% local income tax.
Initially planned for 2021, the tax’s implementation has been repeatedly delayed and is now scheduled for 2025. According to Chosun Daily, domestic exchanges such as Upbit, Bithumb, and Coinone argue that trading volumes will drop significantly once the tax is implemented. They highlight the disparity in income tax on financial investments, where traditional instruments such as stocks, bonds, and funds are only taxed on gains above $36,250, while the cryptocurrency deduction is only $1,800, making almost all crypto investors liable.
Additionally, South Korea is set to implement the Virtual Asset User Protection Act, which will come into effect on the 19th of this month, which will subject financial authorities to scrutinizing the suitability of currently traded coins. An anonymous spokesperson for a cryptocurrency exchange told Chosun Daily that the 20 percent tax “will deter investors” and predicted that “many exchanges will likely close next year” if the tax is implemented as scheduled.
Also, as crypto.news reported Earlier, South Korea’s financial regulator is establishing a system to monitor unusual cryptocurrency trading, urging exchanges to provide internal data. This system, targeting trading outside of normal volume and price ranges, large transactions and unusually delayed executions, could pose “significant challenges for altcoins that cannot readily meet regulatory standards,” according to Matt Younghoon Mok, a senior foreign attorney and partner at Lee & Ko in Seoul.