South Korea's 22% Cryptocurrency Tax to Take Effect in 2027! Opposition Voices: Losses Cannot Be Offset, Risking Trader Exodus
Coin Circle (120btc.CoM): The trading volume of South Korea's five major exchanges plummeted nearly 55% in the first half of this year, while the Ministry of Finance simultaneously confirmed the timeline for cryptocurrency taxation, with a 22% tax rate set to officially take effect on January 1, 2027. The simultaneous freezing of market activity and the finalization of the tax system have reignited controversy over this policy, which has been delayed for six years.
How is the 22% Cryptocurrency Tax Calculated
According to South Korea's Income Tax Act, income from the transfer or lending of virtual assets will be classified as "other income," taxed separately from salaries and business income. Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho confirmed on July 29 at the National Assembly's Planning and Finance Committee that the government is still pushing forward according to the original schedule and has not indicated any delays.
The specific rule is that profits exceeding 2.5 million won (approximately $1,740) will be subject to a 20% national tax, bringing the total tax rate to 22% after adding local taxes; investors below the threshold will be completely exempt from taxes.
The first declaration is expected to occur in May 2028, covering income for the entire year of 2027. The process of implementing this policy has been tumultuous: it was approved as early as 2020, originally scheduled to start in January 2022, then postponed to 2025, and now further delayed to 2027.
Opposition Voices: Losses Cannot Be Offset, Risking Trader Exodus
Opposition party member Kim Sang-hoon criticized the current tax system design, which does not allow investors to carry forward losses to offset future profits, warning that this could push trading activities overseas in the long run. He cautioned that funds might shift to foreign exchanges, decentralized platforms, or over-the-counter peer-to-peer markets, while also diminishing the visibility of local trading volume and tax revenue in South Korea.
In response, Choo Kyung-ho acknowledged the concerns but refused to relax the system: he stated that if cryptocurrencies were to be included in the capital gains tax framework, it would necessitate a comprehensive review of the overall financial market tax design, which would have far-reaching implications.
On another front, the opposition party has already proposed a bill in March advocating for the complete removal of cryptocurrency income from the Income Tax Act; this bill is currently under committee review, and the possibility of repeal or further delays has not been ruled out.
Cryptocurrency Trading Volume Halved
The total trading volume of Upbit, Bithumb, Coinone, Korbit, and Gopax in the first half of this year was approximately $366.58 billion, a staggering 54.6% drop compared to the same period last year, with the decline continuing into July, where monthly trading volume decreased by 16.9% compared to June.
In addition to the inherent cooling of the cryptocurrency market, a significant reason is that many retail investors have moved their funds to the stock market, as evidenced by the recent frenzy surrounding South Korean AI concept stocks.
Market Landscape Changing: Major Exchanges Gaining More Market Share
As trading volume shrinks, the market structure is undergoing a reorganization. The trend of centralization at Upbit continues to strengthen, putting more direct survival pressure on small and medium-sized exchanges: Coinone, Korbit, and Gopax are reportedly evaluating partnerships with securities firms to expand institutional services, and even considering organizational restructuring to find new footholds in a shrinking market.
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