South Korea Implements Crypto Regulations by 2024

Cryptocurrency has gained significant popularity in South Korea, with millions of people actively trading digital assets. However, the country’s financial regulator has not yet recognized cryptocurrency as legal tender or a financial asset. According to a recent report, the current crypto market in South Korea has reached a value of 55.2 trillion, with an average daily trading volume of 11.3 trillion. This indicates the widespread adoption and use of cryptocurrencies in the country.

South Korea has a reputation for early adoption of new technologies, and it has been familiar with the concept of digital tokens and micropayments since 1996. As a result, cryptocurrencies have become a common household asset and a mode of payment in Korea. Many young people have found success in trading cryptocurrencies to 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 service cryptocurrency. This would allow banks to explore virtual asset companies, including crypto trading platforms, e-wallets, and custody services.

The upcoming president, Yoon Suk-yeol, has vowed to reverse the crypto crackdown and deregulate the sector. This narrow victory in the presidential election signals a potential shift in the government’s stance towards cryptocurrencies.

In terms of crypto transfers, South Korea has restricted transfers worth more than $821 to user-verified wallets. Certain exchanges have also adopted the Anti-Money Laundering System (AML) to ensure compliance with regulations.

LABEL Foundation, an NFT infrastructure built on the Ethereum Network, has faced difficulties in obtaining listings on South Korean exchanges due to strict restrictions and supervision from financial watchdogs.

South Korean crypto exchanges, including Upbit, Bithumb, and Korbit, have followed the lead of Coinone in verifying third-party wallet addresses. This is to comply with FATF travel rule guidelines and enhance transparency.

The South Korean government has authorized cryptocurrency ownership and trading by passing an amendment to the Act on the reporting and use of specific Financial Transactional Information. This amendment extends AML/CTF rules to virtual service providers, covering activities such as buying and selling cryptocurrency, crypto-to-crypto exchanges, and storage/management of virtual assets. All crypto service providers are now required to transform their AML/KYC systems and register with Korean financial regulators before engaging in any crypto activities.

In terms of taxation, the virtual assets tax in South Korea has been postponed until 2023. The proposed tax would levy a 20% tax on crypto gains over a one-year period, starting from January 1, 2022. However, there has been opposition to the crypto tax plan from young investors, industries, lawmakers, and financial authorities, leading to its postponement.

Crypto mining is a significant industry in South Korea, and miners benefit from tax breaks under the digital currency tax regime. They can deduct electricity costs as business expenses when filing taxes for crypto in 2022. The Ministry of Economy and Finance has introduced a provision for crypto miners to report operating expenses as tax deductibles, including electricity bills.

Looking back at historical events, South Korea has seen various developments and announcements related to cryptocurrency. These include the proposal of new strict rules for token issuers, the addition of support for Shiba Inu on a crypto exchange, the declaration of Busan as a regulation-free zone for blockchain development, and the ban on raising money through ICOs.

In summary, South Korea has emerged as one of the top adopters of cryptocurrency, with a vibrant crypto market and millions of active traders. While the country has not yet recognized cryptocurrency as legal tender or a financial asset, there have been recent developments in regulations and taxation. The government’s stance towards cryptocurrencies is evolving, and there is ongoing debate and discussion surrounding the industry.