Key Highlights
- The People Power Party has introduced a bill to fully scrap the planned 22% income tax on digital assets set to take effect in 2027.
- With taxes on traditional financial investments recently abolished, lawmakers argue that taxing crypto creates an unfair double standard.
- The National Tax Service is finalizing an AI-driven tracking system to monitor undeclared crypto income.
South Korea’s People Power Party has proposed a bill to scrap taxes on cryptocurrencies, set to take effect in 2027. On March 18, party floor leader Song Eon-seok introduced changes to the Income Tax Act aimed at removing all rules that would tax digital assets.
Under the current plan, crypto gains would face a 20% income tax, which rises to 22% with local taxes. Song explained, “Since digital assets are already classified as commodities and subject to the value-added tax system in Korea, imposing additional income tax would raise the issue of double taxation.”
The proposal also raises fairness concerns. Song pointed out, “Given that the financial investment income tax has been abolished for the development of the capital market and the protection of investors, imposing a separate income tax on digital assets raises issues regarding equity and consistency in the tax system.”
He added that taxing foreign investors could create major administrative challenges, making the system harder to manage. For these reasons, the bill aims to simplify rules while keeping the market active and accessible.
Market and regulatory implications
South Korea remains a key player in Asia’s crypto market, with investors driving most of the trading. Scrapping the planned tax could spark more activity and draw new participants into the market. The move could also set an example for neighboring countries that are weighing their own cryptocurrency rules.
At the same time, authorities are stepping up oversight. The National Tax Service (NTS) announced plans for a KRW3-billion (~$2 million) AI-based system to track cryptocurrency transactions. The platform aims to spot undeclared income, strengthen tax enforcement, and is expected to be operational by late 2026.
Law enforcement is also updating how it handles “dark coins,” cryptocurrencies that hide transaction details. The National Police Agency recently introduced rules requiring dedicated hot wallets, software-based storage, and stricter management of seized assets.
A police official explained, “Whereas in the past, seized assets were stored in warehouses, now we are in an era where we must manage wallet addresses and secret keys.”
Investor protections strengthened
In addition to tightening regulations, South Korea is stepping up efforts to protect crypto users from scams. Starting this October, exchanges will have to monitor all transactions for unusual activity. The Financial Services Commission confirmed new rules requiring exchanges to stop suspicious transfers and help victims recover their funds.
Authorities added, “We’ve established a basis for virtual asset exchanges to sell the virtual assets and provide cash compensation if the victim so desires.” Exchanges will also share information about suspected fraud with investigative agencies, improving coordination across financial institutions.
Taken together, the proposed tax repeal, stronger monitoring, and enhanced fraud protections aim to keep South Korea competitive while protecting investors. These measures show a careful effort to balance market growth, regulation, and safety.
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