The nominee for the Ministry of Finance and Economy, Lee Hyoung-il, has stated on Sunday his commitment to implement the cryptocurrency tax starting next January, despite facing opposition from industry stakeholders and lawmakers.
In documents prepared for a confirmation hearing scheduled for Tuesday, Lee, who is currently the first vice finance minister, indicated that final tax regulations would be established by the National Tax Service by the end of the year, aiming to prevent any confusion for taxpayers during filing.
He defended the classification of income from crypto assets as miscellaneous income under the existing tax regulations, arguing that this is a reasonable way to introduce taxpayer-friendly options, including a basic deduction and a uniform tax rate.
Lee mentioned that taxation on stock trades involving major shareholders, foreign equities, and unlisted shares is already in effect, so it makes sense to extend the same principles to cryptocurrency to maintain tax fairness.
The proposed tax framework will categorize profits from moving or lending digital assets as miscellaneous income, applying a 20 percent tax on earnings. Taxpayers can deduct a basic allowance of 2.5 million won ($1,860) from their net annual gains, but there will be no option to carry forward losses to future tax years.
The initiative was originally planned for 2022, but has faced three delays due to immature tax infrastructure, market fluctuations, and an incomplete investor protection system. Under current legislation, the tax would only affect transactions starting in 2027, with actual filings and payments expected to occur by May 2028.
However, industry representatives claim the timeline remains unrealistic, emphasizing the lack of necessary infrastructure and effective cross-border data sharing agreements.
Earlier in the month, the Digital Asset eXchange Association (DAXA), which represents major crypto exchanges in the country, issued a statement addressing the absence of a unified digital framework between regulators and exchanges, citing insufficient preparation time.
DAXA pointed out that, unlike traditional financial institutions with standardized IT systems, crypto exchanges depend on varied internal data systems that manage complex records, such as on-chain wallet addresses, which cannot be easily integrated into automated regulatory frameworks.
They urged for more time to develop and test the IT infrastructure while establishing standard operating procedures.
Concerns regarding the clarity of data requests were also highlighted. DAXA noted that if inquiries into data lead to privacy complaints, the repercussions would impact exchanges rather than government bodies.
Furthermore, they cautioned that treating crypto earnings as miscellaneous income might result in legal challenges both domestically and internationally, and pointed out that taxing digital assets while removing the financial investment income tax creates an obvious unfairness.
The association stated, “While we acknowledge that crypto taxation is inevitable in the long run, we believe the start date should only be revisited after ensuring that technical infrastructure and data-sharing systems are adequately tested and regulatory reforms are established.”
In response to these developments, lawmakers from the opposition People Power Party have put forth proposals to either postpone or abolish the crypto tax. One proposal aims to completely remove the tax provisions, while another seeks to delay the effective date to January 2030.
In a related note, Lee discussed plans for a new Korean strategic sovereign wealth fund anticipated to launch with over 20 trillion won. He projected that investable liquid assets for next year could reach around 1 trillion won due to direct cash investments and dividends from public entities.
The ministry explained that the fund will primarily be funded through over 16 trillion won in non-cash equity contributions from government holdings in entities such as the Korea Development Bank.
The government intends to establish a dedicated strategic investment account within the Korea Investment Corp. (KIC) before transitioning it into a comprehensive sovereign wealth fund next year.
Authorities anticipate that the fund will provide long-term, patient capital to essential strategic sectors while utilizing the KIC’s global network and credibility to attract private and international investments.
