It looks like the challenges facing the cryptocurrency market in 2019 are coming in all directions. This is after a move by the South Korean government to start taxing cryptocurrency transactions.
South Korea and Cryptocurrencies
Interestingly, South Korea is one of the largest markets for Bitcoin in the world, taking third place. The region is known to be a big player in cryptocurrency trading and as a result, they play a vital role in impacting prices around the globe.
According to the Korea Times, reports are showing that the Ministry of Economy and Finance in South Korea is “pushing” a move to have taxes imposed on all capital gains arising from cryptocurrency transactions. As a result, there may be tax regulations in the same area in the near coming months. An official in the ministry also confirmed that discussions are going on, and in due time, a revised bill may be drawn up that is expected to be ready by the first half of next year.
However, for such legislations to be approved and carried out effectively, it will mean that the country will need to be very clear regarding what and who can be taxed. The first requirement will be defining cryptocurrencies and virtual assets clearly. In this way, government interventions will be more accurate. Then, the second requirement will be either classifying cryptocurrency gains as part of benefits, like those from the stock market, or classifying them like profits from real estate dealings. In order to implement the taxation plans effectively, South Korea will also need to obtain direct access to the trading records held by cryptocurrency exchanges.
Latest Attempts at Legislation
The Korean National Assembly is also considering creating a bill whose goal is to bring transparency within any cryptocurrency activities, and as a result, it will be line with the regulations set by the International Anti-money Laundering standards and Know Your Customer standards as used by financial institutions. The bill will require details, especially the real name of accounts, and as a result, this will put the responsible exchanges under the regulation and oversight of the country’s Financial Services Commission. A crypto exchange licensing system will also be introduced, as recommended by the FATF (Financial Action Task Force).
There is a high possibility that the bill will be passed during the next plenary session by the National Assembly, to be implemented within the next 12 months.
It can be remembered that in 2018, South Korea had held 20% of the world’s cryptocurrency transactions. They clamped down anonymous virtual banks and only left very few exchanges with the permission to continue trading and holding commercial accounts. The latest move is a clear indication that South Korea is now taking the necessary steps to becoming more serious about regulating cryptocurrency.
According to the reports by Arirang News, on a survey done by an investor protection firm in South Korea in April 2019, it showed that there was a rise in investments in the country. The reports indicated a 1% growth every year. It also showed that the country has 7.4% of its population owning cryptocurrencies, with each having more than $6,000 in holdings. This is a clear sign of how much cryptocurrency is growing in the country and its contribution to the global market.
Countries, such as Japan and the USA, also have significant figures and better crypto trading volumes as far as South Korea is concerned. Many other countries have come up with legislation on cryptocurrencies and transactions involving these digital assets and they have been successful. If South Korea comes up with the right regulations, it will also create room for more innovation in the sector.