South Korea's Democratic Party has agreed to delay the implementation of a virtual currency tax law, signaling a temporary truce in the heated debate over domestic digital asset regulations, the Korea Herald reported on December 2.
Representative Park Chang-dae of the Democratic Party announced an agreement to postpone taxation on virtual currency profits for two years. President Park said at a press conference:
“We have decided to agree to a two-year moratorium on the implementation of the virtual currency tax proposed by the government and ruling party.”
As of 2024, approximately 20% of South Korea's population, or approximately 10 million people, will be engaged in trading or investing in cryptocurrencies. However, despite this high level of adoption, the country remains cautious towards the industry.
The country's average daily cryptocurrency trading volume is estimated at 11.3 trillion won ($8.4 billion), often exceeding the trading volume of the Korea Composite Stock Price Index (KOSPI), a stock exchange.
political agreement
The law, which would impose a tax on digital asset income, was originally scheduled to take effect in January. The postponement is broadly in line with the government's proposal, but the ruling People Power Party had called for a three-year grace period.
President Park's opposition agreed to a short two-year postponement, but vowed to block new tax cuts on inheritances and gifts, saying they unfairly benefit the wealthy.
This agreement signals a change in the Democratic Party's position. The party had previously advocated raising the threshold for virtual currency-related tax deductions from 2.5 million won ($1,790) to 50 million won ($35,800), rather than delaying the law altogether.
Despite making concessions on virtual currency taxation, Park emphasized her party's opposition to inheritance and gift tax reform proposals. The government and ruling party plan to lower the top inheritance tax rate from 50% to 40% and significantly raise the standard for deductions for property passed from parents to children.
Debates over fiscal policy
The debate over taxation is taking place within a broader debate about South Korea's fiscal policy.
Last month, Democratic Party leader Rep. Lee Jae-myung reversed course on a proposed tax on financial investment income, choosing to support its abolition. The move was aimed at boosting the country's struggling stock market and placating millions of investors.
Mr. Lee said:
“We could not ignore the voices of the 15 million financial investors who could be affected by structural vulnerabilities.”
Deferring cryptocurrency taxes provides temporary relief for digital asset traders, but raises questions about the government's ability to balance competing fiscal priorities.
