South Korea’s crypto community alarms that the impeding 20% tax on crypto gains will drive away investors and can potentially ruin the market.
As South Korea‘s 20% tax on crypto gains looms, the local cryptocurrency community expresses its concerns, saying the controversial rate will force investors to leave the market. South Korea’s Ministry of Economy and Finance is planning to impose a 20% tax on the amount exceeding the basic deduction of 2.5 million won (around $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 the Chosun Daily, domestic exchanges like Upbit, Bithumb, and Coinone argue that trading volumes will significantly drop once the tax is enforced. They highlight the disparity in financial investment income tax, where traditional instruments like stocks, bonds, and funds are only taxed on gains above $36,250, whereas the crypto deduction is merely $1,800, making nearly all crypto investors liable.
You might also like: South Korea’s Ministry of Justice forms task force to damper crypto crimes
Other than that, South Korea is set to implement the Virtual Asset User Protection Act, which will take effect on 19 this month, which will subject financial authorities to scrutinize the appropriateness of currently traded coins. An anonymous spokesperson from a crypto exchange told the Chosun Daily that the 20% tax “will deter investors,” and predicted that “many exchanges will probably shut down next year” if the tax is implemented as scheduled.
Additionally, as crypto.news reported earlier, South Korea’s financial regulator is establishing a system to monitor unusual crypto trading, urging exchanges to provide internal data. This system, targeting trades outside normal volume and price ranges, large transactions, and unusually delayed executions, could pose “significant challenges for altcoins that cannot promptly meet regulatory standards,” according to Matt Younghoon Mok, senior foreign attorney and partner at Lee & Ko in Seoul.
Read more: Korean crypto exchanges to avoid ‘mass delistings’ despite new rules
Source