Reports indicate the South Korean ministry of strategy and finance is to begin taxing cryptocurrency in a bid to regulate the crypto sector by 2019.
Since the winter of 2018, South Korea has garnered a great deal of attention as a key crypto-battleground; the rumoured ICO bans, exchange shutdowns and misleading negative press coverage has contributed to making South Korea one of the most misunderstood locations when it comes to cryptocurrencies.
But reports, on the contrary, are emerging at a hastening pace, and now South Korean regulators are reportedly planning to announce placing a capital gains tax and other income taxes on virtual money. In a statement made to Financial News, a ministry official said:
“We do not have a specific time frame, but we are thinking about announcing a virtual money tax in the first half of the year”.
The snowball effect
Negative speculation surrounding cryptocurrency in the country began appearing in January and then very slowly, as the clarity around purported crypto bans came to light, it became apparent that things were, in fact, moving in a positive direction.
As February rolled through, discussions of regulation in South Korea were brewing especially when the chief of South Korea’s Finance Supervisory Service (FSS), Choe Heung-Sik made these comments at a press conference:
“The whole world is now framing the outline (for cryptocurrency) and therefore (the government) should rather work more on normalization than increasing regulation.”.
Remarks such as these have made for a snowball effect in the global discussion of cryptocurrency. Most recently, BitcoinNews reported that Park Won-Soon, Mayor of Seoul is bringing forth new plans to adopt blockchain technologies with remarkable intentions to create Seoul’s very own cryptocurrency.
Government officials in South Korea have conducted direct investigations in several countries around the world, including Japan, the United Kingdom and the United States. Officials made conclusions that each country has its own approaches on how to categorize cryptocurrencies for taxation purposes:
“Currently, the US and the UK are taxed with capital gains tax, Japan with miscellaneous income, and Germany with other income. It is because the characteristics of virtual money were different in each country, such as payment means, monetary ability, financial assets, and so on. However, these countries have found that there are few cases where actual tax is imposed, as opposed to taxation based on the principle that there is a tax on income.”.
These are very telling moments for the future of the cryptocurrency industry. South Korea’s efforts over the course of the next year could contribute to those of Switzerland, which at present is home of the Crypto Valley Association. Switzerland is beginning to receive increasing enquiries concerning blockchain technologies and is formally investigating the economic purposes and functions of the tokens.
South Korea, the third largest fiat-to-Bitcoin market in the world, is approaching the creation of positive conditions for regulatory frameworks, preparing for its capital to have its own cryptocurrency and is in now preparing for various taxation laws that would begin to normalize the existence of cryptocurrencies in the country. These are several huge steps in the right direction.