Lawmakers in South Korea settled a long political battle on Sept. 30th and headed off moves by the ruling party to delay the implementation of the controversial crypto tax legislation.
In a meeting on the 26th but only reported yesterday, Finance Minister Hong Nam-ki and key Democratic lawmakers from the National Assembly, South Korea’s legislature, are said to have come to a final agreement that the crypto tax will be carried out as planned
The Korean crypto tax will tax crypto profits in a similar way to traditional stocks. It will levy a 20% tax on income generated by crypto transactions in excess of 2.5 million Korean won, or about $2,100.
The majority Democratic party in the National Assembly was attempting to pass an amendment to the tax bill which would have postponed the tax until 2023. Democratic lawmaker Kim Byung-ook proposed in open session on September 15th that the capital gains tax on cryptocurrency should be rolled out alongside a similar tax on stocks in 2023, rather than 2022.
While the majority ruling party should theoretically have had the numbers to pass the amendment they faced stiff opposition from Finance Minister Hong, who wields significant power and has served in many high-ranking positions in the country, including as Prime Minister.
Minister Hong has repeatedly stated throughout 2021 that the tax would come into effect as originally planned, going as far as to say that the crypto tax was inevitable for 2022.
At least twice since May, Minister Hong has repeated his firm stance against the ruling Democratic party that the crypto tax would come into effect without delay.
While a victory for Hong, some crypto industry insiders are concerned the new tax will see trading volumes and overall interest in the industry decline.
But Jun Hyuk Ahn, a Korean crypto market analyst, feels that there is no reason to worry about a decline in interest. He told Cointelegraph:
“I don’t believe taxation will cause deterrence on the crypto market in Korea. We’ve seen what happened in the States, and it won’t be much different here.”
The new legislation comes on top of new regulations regarding cyber security that saw the recent market exit of many Korean exchanges. Just 29 crypto exchanges met the September 24th deadline to come into compliance.
Of those 29, only four have obtained real-name bank account partnerships with domestic banks which grants them the legal right to continue offering KRW trading pairs. Those four are Upbit, Bithumb, Coinone and Korbit. The remaining 25 exchanges have Internet Security Management System (ISMS) certification and will offer crypto-to-crypto trading pairs.
From today, Upbit will require any user trading in excess of 1 million KRW ($842) to undergo KYC, with all users trading any amount also required to do so by October 8th. The new KYC process is meant to bring exchanges in line with anti-money laundering procedures.
Korean exchanges, such as Upbit, previously used the real-name bank account and their Kakaotalk messaging app as de facto KYC mechanisms. Bithumb, Coinone, and Korbit are expected to follow Upbit in requiring further KYC from its users.