Reactions to South Korea's Cryptocurrency Supporter Grows
One of Yoon Suk-yeol's promises to his voters was to implement a set of crypto-friendly policies in South Korea. Yoon, who won in March and came to office this month, said he would raise the tax threshold for crypto investment earnings to 50 million won, or about $38,922.
South Korea's National Assembly Research Service (NARS), which provides lawmakers with information and analysis on legislative and policy issues, classifies crypto as a virtual asset.
An announcement released last week says the tax threshold for income from virtual assets should be 2.5 million won, or $1,946 with a 20% tax rate.
According to NARS, the tax rate is set at a level similar to that of financial investment income, so asset classes do not face a heavy tax burden. But the suggested threshold is much lower than Yoon intended.
South Korea's New Crypto Tax Rules
The new tax rules will come into effect in 2023 and a new regulatory body for digital assets will be established. The country's wealth income tax system was introduced in December 2020. Yoon also pledged to support the first cryptocurrency offerings, which were banned in 2017.
“What we can see right now is that the government is opening up to the role of cryptocurrencies as an investment asset,” Jisu Park, CEO of Seoul-based smart contract audit and infrastructure startup Sooho.io, said in a statement.
South Korea is one of the most active countries in the world in terms of crypto. According to a study by the country's top financial regulator, the market has grown to 55.2 trillion won ($45.9 billion) by the end of 2021, with the number of users reaching about 5.58 million, or about 10% of the country's population.
The crypto market in South Korea is booming, but has been in isolation, in part due to regulatory restrictions. Five major local exchanges dominate the space: Upbit, Bithumb, Coinone, Korbit, and Gopax. Foreign and smaller players are struggling to meet the government's requirement to partner with local commercial banks.
How did the collapse of TerraUSD (UST) affect Korea?
As in other countries, the collapse of TerraUSD (UST), an algorithmic stablecoin aimed at maintaining its stablecoins on the dollar using the cryptocurrency Luna, has raised the alarm for regulators about the volatility of the crypto market.
According to local media reports, South Korea's financial authorities will step up steps to enact a digital asset regulation that includes consumer protection. South Korean developer Do Kwon is the founder of Singapore-based Terraform Labs, the organization behind UST and Luna.
South Korean crypto markets have taken action to either suspend or warn Luna, whose value has fallen to almost zero. Bithumb, which plans to delist Luna, currently has the seventh-largest trading volume of the coin, according to Coinranking.