Crypto Tax Countdown Next Year... Fears of a 20% Drop in Trading Volume [Crypto Briefing]

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[The Financial News] The National Tax Service (NTS) has begun building the tax infrastructure and securing data from cryptocurrency exchanges ahead of the planned launch of crypto taxation in January next year. As a total tax rate of 22% is set to apply to gains exceeding 2.5 million won from the transfer or lending of virtual assets, concerns are growing over a sharp decline in market liquidity and an exodus of investors overseas. In response, an emergency forum will be held at the National Assembly of the Republic of Korea on the 7th to review institutional measures that need to be improved.
According to the industry and authorities on the 3rd, the NTS has recently been organizing the tax infrastructure that will be implemented next year, including securing transaction data from crypto exchanges. Under the current law, crypto taxation was originally scheduled for 2025 but has been postponed by two years, putting its launch in January 2027 ahead.
The industry expects that another postponement will not be easy this time. Under the roadmap for corporate participation in the crypto market announced by the Financial Services Commission, listed companies and professional corporations are being encouraged to enter the market, making it difficult to justify delaying taxation only for individual investors, according to observers.
However, market participants warn that if taxation is introduced, liquidity in the domestic crypto market could shrink sharply. Tiger Research estimated that trading volume on domestic exchanges would fall by at least 20% if local taxation takes effect. In particular, high-net-worth investors seeking to avoid the tax burden may move funds to overseas exchanges with relatively looser regulations.
Overseas cases also support these concerns. In India, which imposed a 30% tax on crypto gains in 2022, trading volume at major exchanges plunged by as much as 70% immediately after the policy took effect. Indonesia also saw trading volume fall 60% year on year after introducing a high tax rate in 2023. An industry official said, "Although the current 22% rate is lower than India's, capital outflows could happen even faster in Korea, where price gaps with overseas exchanges, known as the Kimchi Premium, exist."
Some lawmakers are also raising concerns about double taxation. With the financial investment income tax already abolished, they argue that imposing income tax on crypto assets starting next year would go against tax fairness. That is also the context behind People Power Party lawmaker Song Eon-seok's proposal of an amendment to the Income Tax Act that would remove the clause taxing capital gains from crypto assets.
On the 7th, the People Power Party's Park Su-young, secretary of the Finance, Economy and Planning Committee, will host an emergency forum titled "Crypto Taxation, Emergency Review Forum" at the National Assembly of the Republic of Korea. Moon-Sung Oh, president of the Korean Association of Tax Policy and a professor at Kyung Hee University (KHU), will deliver the keynote presentation. The discussion will then feature Hong Ki-yong of Incheon National University, Shim Tae-seop of UOS, Kim Hyun-dong of Pai Chai University, accountant Jung Sung-cheol of SL Partners, and Moon Kyung-ho, director of the income tax division at the Ministry of Finance and Economy, with UOS emeritus professor Choi Yong-seon serving as moderator. The forum will focus on the reliability of the NTS tax payment system and tax design that investors can accept.
Meanwhile, crypto businesses including the Digital Asset eXchange Alliance (DAXA) have expressed concerns over the revised enforcement decree of the Act on Reporting and Using Specified Financial Transaction Information, which was announced for legislation in March. They reportedly see practical difficulties in being required to report all transactions of 10 million won or more and to meet verification obligations, including existing customer identification duties.
elikim@fnnews.com Kim Mi-hee Reporter