Delve into South Korea’s Cryptocurrency Regulation through 2024
Cryptocurrency has become a prominent asset and a popular mode of payment in South Korea. Despite this, the country does not consider it a legal tender or a financial asset. According to a report from the country’s financial regulator, the current crypto market in South Korea is valued at 55.2 trillion as of December, with an average daily trading volume of 11.3 trillion. Additionally, more than 15.2 million people have registered accounts with 24 cryptocurrency brokers, and 5.6 million of them actively trade.
South Korea is well-known for its early adoption of new technologies, and it has been familiar with the concepts of micropayments and digital tokens since 1996. As a result, cryptocurrencies have become a common asset in households and a means for individuals, particularly the youth, to engage in trading and make money.
In terms of regulations, there have been recent developments in South Korea. The Korean Federation of Banks (KFB) is seeking permission from the future presidential government to license local banks to provide services to cryptocurrency-related companies, such as crypto trading platforms, e-wallets, and custody services.
The upcoming president of South Korea, Yoon Suk-yeol, has vowed to reverse the crackdown on cryptocurrencies and deregulate the sector. This comes as a narrow victory secured by Yoon in the country’s presidential election.
In terms of restrictions, South Korea has implemented measures to restrict crypto transfers higher than $821 to user-verified wallets. This means that transfers exceeding this amount will be limited to wallets that have been verified by the users. Some exchanges have also adopted the Anti-Money Laundering System (AML) to comply with regulations.
One notable development is the emergence of the LABEL Foundation, which aims to provide an NFT infrastructure built on the Ethereum Network. However, obtaining a listing on South Korean exchanges has proven to be challenging due to strict restrictions and supervision from financial watchdogs.
In terms of taxation, there have been debates and postponements regarding the taxation of virtual assets in South Korea. The current plan is to impose a 20% tax on crypto gains over a period of one year, with a threshold of KRW 2.5 million (US$2,122). However, these plans have faced opposition from young investors, industries, lawmakers, and financial authorities, leading to delays in implementation.
Crypto mining is also prevalent in South Korea, with miners benefiting from tax breaks under the digital currency tax regime. They are allowed to deduct electricity costs as business expenses during the tax filing process. Additionally, the import of mining hardware for personal use is allowed if the market value is less than $150.
Looking back at historical events, South Korea has seen various regulatory developments and announcements. These include proposals for strict rules for token issuers, the addition of support for cryptocurrencies like Shiba Inu on crypto exchanges, and the declaration of Busan as a “regulation-free” zone for blockchain development.
In conclusion, South Korea is a significant player in the cryptocurrency market, but regulations have been a topic of discussion and development. Crypto exchanges in the country must be licensed and have partnerships with banks to provide services. Despite the lack of legal tender status, cryptocurrencies have become a widely accepted asset and means of payment in South Korea.