Crypto

South Korea’s new president delays crypto taxes in favor of consumer protections

South Korea’s newly-elected president Yoon Suk-yeol announced Tuesday he would push to defer taxation on crypto investment gains at least until a new set of regulations called the Digital Asset Basic Act (DABA) is enacted.

South Korea’s crypto tax was initially set to come into effect for the 2022 fiscal year but was pushed back to 2023 last December. E-daily reported that Yoon will ensure the crypto tax law does not come into effect until reasonable legislation is in place to protect consumers, which could be by 2024.

The president-elect’s presidential transition team has been exploring its options in delaying the tax since March, when Yoon won the election on the grounds that there was insufficient legislation in place to justify levying taxes on digital assets.

DABA was conceived by the Financial Services Commission (FSC) this year and entails a series of laws related to consumer protections. The act pertains to token issuances, nonfungible tokens (NFT), centralized exchange (CEX) listings, international finance as it relates to crypto and includes a response to United States President Joe Biden’s executive order on crypto.

Through DABA, the FSC plans on introducing a crypto-insurance system as a backstop measure against hacks, system errors and unauthorized transactions.

The controversial crypto tax legislation that has been delayed yet again would levy a 20% tax on crypto investment gains above about $2,100 per year.

On Tuesday, an FSC representative told e-daily that “taxation of investment income from virtual assets should be done after investor protections are in place.”

Simon Kim, CEO of Hashed — a South Korean crypto venture capital firm — agreed, telling Gist Vile on Wednesday that “it doesn’t make sense to impose a tax on cryptocurrency before enacting relevant statutes, which clearly state cryptocurrency-related businesses’ scope and are a prerequisite for taxation.”

“Without profound research on the industry and robust implementation strategies, promoting taxation on cryptocurrency can cause a variety of accidents and raise some serious issues in taxation equity because an investor protection system for cryptocurrency has yet to be implemented.”

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While the FSC works to draft new bills as part of DABA, Yoon plans to establish the Digital Industry Promotion Agency to serve as the reference point for regulatory issues in the crypto industry.