South Korean politicians to enforce a 2-year suspension on cryptocurrency taxation
South Korea’s Democratic Party has agreed to postpone the implementation of crypto taxation laws, indicating a temporary truce in the ongoing debate over digital asset regulation in the country, as reported by the Korean Herald on Dec. 2.
Democratic Party floor leader Rep. Park Chan-dae made the announcement to delay the taxation of crypto profits by two years during a press conference, stating:
“We have decided to agree to a two-year moratorium on the implementation of the cryptocurrency taxation proposed by the government and ruling party.”
As of 2024, around 20% of South Korea’s population, nearly 10 million people, are involved in crypto trading or investment. Despite this high level of adoption, the country has taken a cautious approach towards the industry.
The average daily crypto trading volume in the nation is estimated at 11.3 trillion won ($8.4 billion), often surpassing that of its stock exchange, the Korea Composite Stock Price Index (KOSPI).
Political agreement
The law that imposes a tax on digital asset income was initially scheduled to go into effect in January. The delay closely aligns with a government proposal, although the ruling People Power Party pushed for a three-year moratorium.
Park’s opposition party has agreed to a shorter two-year delay but has vowed to block new tax cuts for inheritances and gifts, which they claim disproportionately benefit the wealthy.
This agreement represents a change in the Democratic Party’s stance, as they had previously proposed increasing the threshold for crypto-related tax deductions instead of delaying the law completely.
Despite conceding on crypto taxation, Park stressed his party’s opposition to proposed changes to inheritance and gift taxes. The government and ruling party are planning to reduce the top inheritance tax rate from 50% to 40% and significantly raise the deduction threshold for assets passed down from parents to children.
Debate around fiscal policy
The discussions on taxes come amidst broader conversations regarding South Korea’s fiscal policies.
Last month, Democratic Party leader Rep. Lee Jae-Myung reversed course on a proposed tax on financial investment income and instead supported its repeal to stimulate the country’s struggling stock market and satisfy millions of investors.
Lee stated:
“I could not ignore the voices of 15 million financial stock investors who might be affected by structural vulnerability.”
The delay in crypto taxation offers temporary relief to digital asset traders but raises questions about the government’s ability to balance competing fiscal priorities.
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