South Korea could soon reclassify crypto as goods instead of currencies. The result is that crypto coins like BTC would be subject to a tax of up to 20 percent. Discussions have been ongoing for the past few days on amending the current laws so that capital gains tax can be introduced for the crypto sector.
If passed, the new law would make crypto coins, which are described as “electronic certificates of economic value” by government officials subject to capital gains tax. In South Korea, crypto coins are still considered as a function of currency. As a result, they do not incur an income tax. However, a South Korean court recently noted that crypto coins were increasingly being tradeD as assets that have property value.
However, the court recognized that several other issues arose from this consideration. For instance, it would effectively mean recognizing an intangible asset as a property with value. Additionally, the necessity of taxation had to be considered.
A taxation bill would have a huge impact on the South Korean crypto sector. With the nation being such a major player in the crypto sector, it could also affect the global crypto industry. The country is country one of the largest hubs for the crypto sector and is the home of various major exchanges.
Besides that, the nation has the highest rate of adoption. In 2017, a survey found that over a third of South Koreans were actively investing in the crypto sector. However, trading volumes have fallen in recent months due to the effects of the COVID19 pandemic. For instance, recent data shows that trading volumes in South Korea have fallen by 43%.
At the start of January, South Korea’s parliament became the first to pass a comprehensive crypto law. The law provides a clear legal framework for crypto coins and crypto exchanges. The final details of the tax bill for the crypto sector are set to be announced soon. If the terms of the bill prove too harsh, it could cause South Koreans to abandon the crypto sector. Besides that, it could cause crypto exchanges in the country to leave.