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Korean Crypto Community Warns 20% Tax on Earnings Could Devastate Market
The South Korean cryptocurrency community fears that imposing a 20% tax on cryptocurrency earnings will scare away investors and potentially ruin the market.
AS South KoreaAs 20% tax on cryptocurrency earnings looms, the local crypto community is voicing concerns, saying the controversial rate will force investors out of 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 (about $1,800), plus an additional 2% local income tax.
Originally scheduled for 2021, the tax’s implementation has been repeatedly delayed and is now scheduled for 2025. According to Chosun Daily, domestic exchanges such as Upbit, Bithumb, and Coinone claim that trading volumes will significantly decline once the tax is implemented. They highlight the disparity in financial investment income tax, where traditional instruments such as stocks, bonds, and funds are only taxed on earnings above $36,250, while the deduction for cryptocurrencies is only $1,800, making almost all crypto investors liable.
In addition, South Korea is set to implement the Virtual Asset User Protection Act, which will take effect on the 19th of this month, which will subject financial authorities to scrutiny of the appropriateness of coins currently traded. An anonymous spokesperson for a cryptocurrency exchange told Chosun Daily that the 20% tax will “discourage investors” and predicted that “many exchanges will likely close next year” if the tax is implemented as planned.
Also, like crypto.news reported South Korea’s financial regulator was previously in the process of establishing a system to monitor unusual cryptocurrency trading, prompting exchanges to provide internal data. The system, which targets trades outside of normal volume and price ranges, large transactions, and unusually delayed executions, could pose “significant challenges for altcoins that fail to promptly meet regulatory standards,” according to Matt Younghoon Mok, senior foreign attorney and partner at Lee & Ko in Seoul.