South Korean politicians proposed a delay in the implementation of a crypto tax law until 2023, citing the need for a more gradual approach to crypto regulations.
South Korea’s dominant political group, the Korea Democratic Party (KDP), proposes a significant shift on the country’s impending cryptocurrency tax law. The KDP suggests that the implementation of the policy should be postponed by two years, hence moving the starting date to January 1, 2023, instead of the previously planned date of October 2021.
Gradual Approach to Crypto Regulation
The delay proposal comes from two well-known members of the KDP, namely, Lee Kyung-ho and Noh Woong-rae. They argue that the postponement aims to provide crypto businesses and investors more time to adapt to the new tax policy. The delay is seen as a response to the current difficult conditions for digital asset operators in South Korea and exemplifies a more gradual approach to crypto regulations in the country.
In fact, the proposed delay aligns with recommendations made by Korea Blockchain Association. This body had previously suggested that the government postpone the tax regime’s implementation until 2023, allowing local crypto businesses a sufficient adaptation period.
Details of the Proposed Tax Law
Originally, the Ministry of Economy and Finance announced the cryptocurrency tax law in July 2020, planning to start the levy in October 2021. The proposed law stipulates a 20% tax on crypto profits that exceed 2.5 million Korean won (around $2,300) annually.
The law marks one of the first attempts by the South Korean government to regulate and tax digital currency transactions. Before this law, cryptocurrencies were effectively in a “tax blind spot.”
Public Reactions and Possible Consequences
The proposed delay in the crypto tax law implementation has received mixed reactions from the public. While some people welcome the delay, viewing it as a positive step towards a more tolerant regulatory environment, others see it as a mere political tactic.
Regardless of the reactions, it’s clear that the delay could significantly impact the crypto market in South Korea. A sudden introduction of the tax law might cause market volatility and potential capital flight. On the other hand, a gradual approach might provide crypto businesses and investors a more predictable regulatory environment.
What’s Next for the Crypto Regulation in South Korea?
The future of the crypto tax law depends largely on the policymakers’ decision. If they decide to pursue the delay, the policy’s implementation may be postponed until 2023. This could give the crypto market much-needed breathing space, allowing businesses and investors to adjust and prepare for the new tax law.
If the policymakers decide to stick with the original schedule, the crypto tax law will come into effect in October 2021. This could result in a period of market volatility, as businesses and investors scramble to adapt to the new regulatory environment.
Regardless of the decision, it’s evident that South Korea is pushing towards a regulated crypto market, potentially setting precedent for other countries to follow.
