South Korea to Begin Taxing Cryptocurrency Transactions

The government of South Korea has announced its intentions to begin taxing capital gains on cryptocurrency transactions. Following a report by The Korea Times on the 9th of December, it was disclosed that the new bill to implement the development will be composed and executed by the Ministry of Economy and finance by 2020.

Also, Korean lawmakers are trying to gain approval for a similar bill focused on enforcing transparency in cryptocurrency activities. If this bill is passed, the proposed rules will be implemented exactly a year after the country’s National Assembly’s plenary session.

Though the capital gains bill will be implemented irrespective of similar legislation, The Korea Times cites that the government will be expected to provide a clear definition of what cryptocurrencies or digital assets will be classified under the new ruling.

One of the issues to be defined is whether cryptocurrency-related gains should be taxed similarly as gains in stocks or real estate.

For the Korean government to initiate this new taxation policy, it would require access to private trading information from exchanges, an exercise already in progress in nations like the US.

Means to Deter Fraudulent Activity
It has been noted that if the proposed bill by the South Korean administration is passed, banks will be mandated to provide real account details to cryptocurrency exchanges. What this means is that cryptocurrency exchanges will be expected to implement similar KYC and Anti-Money Laundering regulations that are practiced by normal banks.

This ruling will place cryptocurrency exchanges under the purview of South Korea’s Financial Services Commission and will include an exchange certification policy set by the FATF.

This is coming after a hack that was targeted at Upbit, a South Korean exchange. It was revealed that the perpetrators made away with 342,000 Ethereum tokens (roughly $42 million at the time) while the company was in the process of transferring assets between its hot and cold storage systems which have led many to believe that it was an inside job.

Upbit, however, has promised to refund all affected customers.