April 16, 2024

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The Upbit Market Index (Dunamu)

South Korea’s lawmakers are trying to push back controversial taxation on income from investing in cryptocurrencies, which is to be implemented from Jan. 1, 2022.

The opposition People Power Party was drafting a proposal that eases capital gains taxes on cryptocurrencies and is expected to submit the bill as early as Oct. 12.

The People Power Party’s bill suggests a one-year delay for crypto gain taxation to 2023 along with a more generous tax redemption than currently planned. The lawmakers plan to revise the current law to impose a 20 percent tax rate for profits between 50-300 million won ($42,000-$251,000) and 25 percent for profits above 300 million won. This is in line with the Financial Investment Income Tax, which is to be implemented starting from 2023.

The government’s current plan to levy a 20 percent tax on capital gains for cryptocurrency above 2.5 million won from 2022 has been subject to criticism for placing heavier tax rates on cryptocurrency gains than is charged on other financial gains stipulated in the Financial Investment Income Tax.

"It is not right to impose taxes first at a time when the legal definition of virtual currency is ambiguous,” Rep. Cho Myoung-hee of the People Power Party said. “The intention is to ease the tax base to the level of financial investment income tax so that virtual currency investors do not suffer disadvantages.”

In addition to Cho’s proposal, there are two other revisions under discussion in parliament.

The government however has stood firm on carrying out the taxation plan.

Finance Minister Hong Nam-ki downplayed the possibility of delaying taxation during a parliamentary hearing Oct. 6.

“It is difficult to delay taxation on virtual assets in terms of policy reliability and legal stability,” Hold told lawmakers.

Meanwhile, digital asset indexes show investment sentiment is reviving. The Upbit Market Index stood at 12,573.21 points, almost 32 percent up from September’s lowest point of 9,541.12 points. The index rose to a record high of 13,972.08 points on May 9 before plummeting to 6,233.81 points on July 20.

A market index by Bithumb, one of the four major cryptocurrency exchanges, also showed a similar movement in transaction volume and prices. The Bithumb Market Index, which provides an overall view of price changes in the virtual asset market, also rose 32 percent from Sept. 29 to Oct. 11.

The Fear-Greed index by Dunamu, the operator of Upbit, entered a state of “enhanced interest” in the market. The index stood at 67.04 as of noon on Oct. 11. Figures between 61 and 80 reflect a market witnessing increased transaction volume and a rise in prices in virtual assets.

By Park Ga-young (gypark@heraldcorp.com)