One of the pledges Yoon Suk-yeol made to his electors was to implement a set of crypto-friendly policies in South Korea. Yoon, who won in March and came into the office this month, said he would raise the threshold for crypto investment gains to 50 million won or around $38,922. But he’s getting some resistance.
The National Assembly Research Service (NARS) of South Korea, which provides information and analysis on legislative and policy issues to lawmakers, classifies crypto as a virtual asset. It says the tax threshold for income generated from virtual assets should be 2.5 million won or $1,946 with a tax rate of 20%, according to a notice posted last week.
The tax rate, NARS maintains, is set at a similar level to that of financial investment income and “not heavily taxed.” But its proposed threshold is much lower than what Yoon strives for, and once passed, the new tax policy is set to take effect in 2023. The country’s asset income tax system was introduced in December 2020.
Yoon also vowed to approve initial coin offerings, which were banned back in 2017.
South Korea is one of the world’s most crypto-active countries. The market grew to 55.2 trillion won ($45.9 billion) by the end of 2021, with the number of users reaching nearly 5.58 million or around 10% of the country’s population, according to a study by the nations top financial regulator.
The crypto market in South Korea is booming but also insular in part due to regulatory restrictions. The space is dominated by five major local exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax. Foreign and smaller players, on the other hand, have a harder time meeting the government requirement of partnering with local commercial banks.
As in other countries, the crash of terraUSD (UST), an algorithmic stablecoin that aims to maintain its pegs to the dollar using its sister coin Luna, raised the alarm about the crypto market’s volatility to regulators. South Korea’s financial authorities will speed up their pace to enact a digital asset regulation that includes consumer protection, local media reported. South Korean developer Do Kwon is the founder of Singapore-based Terraform Labs, which is the organization behind UST and Luna.
South Korean marketplaces have moved to either suspend or warn against luna, of which value has collapsed to nearly zero. Bithumb, which plans to delist luna, currently has the seventh-largest trading volume of the coin, according to Coinranking.