Korea seeks another crypto tax delay over gaps in overseas data and rules

The government will seek to postpone cryptocurrency income taxation by another two years to 2029, Finance Minister Lee Hyoung-il said Thursday, renewing debate over tax fairness and policy credibility after three previous postponements.

Lee said more time is needed to secure overseas transaction data and refine the rules. But the reversal, just a month after the government reiterated its commitment to proceeding in January, has drawn criticism over policy predictability and possible political motivations.

At a briefing, Lee said the government would work with the National Assembly to pursue the delay. The announcement came a day after ruling Democratic Party of Korea (DPK) Chairman Kim Min-seok formally requested another postponement.

Under the legislation awaiting implementation, income from transferring or lending digital assets would be classified as miscellaneous income. Annual net profits above a 2.5 million won ($1,900) allowance would be taxed at 22 percent, including local income tax. Net profits would be calculated by deducting acquisition costs and related expenses from proceeds.

The government said introducing the tax before exchanges of cryptocurrency transaction information with the United States begin in 2029 could put the domestic market at a disadvantage. It also cited expected changes to asset definitions and rules governing service providers under the envisioned Digital Asset Basic Act, which would establish a broader regulatory framework for the crypto market.

“The adjustment maintains the fundamental principle that income should be taxed, while improving the effectiveness of taxation on domestic and overseas transactions, ensuring fairness among taxpayers and establishing a reliable and stable tax framework,” Lee said.

During the additional preparation period, the government will seek to allow investors to carry losses forward for three years, reflecting cryptocurrency’s volatility, Lee said. It also plans to strengthen overseas data collection and analysis and accelerate digital asset legislation to support industry growth and protect users.

A public-private working group will develop reform proposals by the first half of 2027. Legislative amendments would be submitted during the Assembly’s regular session that year, followed by detailed tax guidelines in the first half of 2028.

First announced in July 2020 and enacted into law that December, the tax was originally scheduled to take effect in 2022. Implementation was subsequently pushed back to 2023, 2025 and 2027. The latest proposal would constitute a fourth postponement if approved by lawmakers.

The government maintained until mid-October that the tax would proceed as scheduled, but signs of a shift emerged later that month.

First Vice Finance Minister Kwon Dae-young held a closed-door meeting with representatives of the country’s five major cryptocurrency exchanges on Oct. 20 to assess their readiness and hear industry concerns. The meeting fueled speculation that the government could soften its stance. The DPK also met exchange representatives on Oct. 30 to hear their requests for a postponement and other industry views.

Industry welcomes delay, opposition cries populism

Industry participants welcomed the proposed delay, arguing that accurate profit calculations and equal treatment of domestic and overseas transactions must come first.

One major obstacle, according to the industry, is verifying acquisition costs for assets transferred through overseas exchanges or personal wallets. Without reliable purchase records, investors could face inconsistent tax burdens. Rules covering newer products and transactions, along with filing and IT systems, also require further work.

Coin exchanges have also warned that difficulty obtaining overseas records could encourage investors to move assets abroad or into personal wallets.

Investor opposition has added pressure. Parliamentary petitions seeking abolition of the tax and a further two-year delay each secured more than 50,000 supporters, qualifying them for Assembly consideration.

A Tiger Research survey conducted with Chainalysis found that 73.7 percent of 2,423 Korean cryptocurrency investors opposed implementation under the current rules. Among opponents, however, 51.5 percent said they would accept taxation if the shortcomings were adequately addressed.

“The cryptocurrency tax system is still not properly established, and a premature rollout could fuel complaints and resistance from users over fairness and other issues,” a cryptocurrency industry official said.

Critics, however, argue that repeated extensions weaken the principle that income should be taxed and undermine confidence in government deadlines. They also question whether another delay is fair to those paying tax on other investment income.

Political considerations have also come under scrutiny. Under the scheduled Jan. 1, 2027, start date, the first filings and payments would be due in May 2028, immediately after the general election planned for April.

That timing has fueled suggestions that the government and ruling party are seeking to avoid alienating younger cryptocurrency investors.

“This postponement is typical populist politics,” said Mun Jong-hyeong, a spokesman for the main opposition People Power Party, accusing the government and ruling party of prioritizing young voters’ sentiment and approval ratings without first establishing adequate market infrastructure or clear legal definitions.