Crypto In South Korea
This blog post will cover:
- Is crypto legal in South Korea?
- The right of the Supreme Prosecutors’ Office
- Examination of compliance
- Authority by the Prosecution Service and the Korean National Police Service
- Taxing and tax offenses
- Crypto taxes in South Korea
- South Korean crypto use cases
- The future of crypto in South Korea
South Korea is amid the leading countries with many crypto traders. The country doesn’t have leading traders alone: cryptocurrency is also popular. The reason crypto’s famous is because of the great oriented knowledge South Koreans have about it. Recently, a study showed that about 10% of Korean residents use cryptocurrency directly or indirectly.
The cryptocurrency market developed an average sum of $45.9 billion last year, scaling to 5.58 million active users. Even though crypto is widely accepted with the legal law of owning it , some regulations and facts need to be familiarized with in the South Korean crypto laws. What is its future in South Korea? This and more discussions are below:
Is crypto legal in South Korea?
Yes, cryptocurrency is legal in South Korea. However, it hasn’t been legally declared by the authorities as the official means of payment. The law supports people to possess and trade cryptocurrency.
The right of the Supreme Prosecutors’ Office
The office of the Supreme Prosecutors’ Office can investigate any matters related to Anti-Money Laundering through cryptocurrency. The opportunity to own and sell crypto assets isn’t immune to prosecution by the named office if money laundering issues or related offenses arrive.
Examination of compliance
The Korea Financial Intelligence Unit deals with examining and complying with financial regulations. Cryptocurrency is a digital asset: it’s valuable and falls under the Financial Services Commission. Thus, the Korea Financial Intelligence Unit is under the Financial Services Commission that ensures residents consider the law like fiat money.
Authority by the Prosecution Service and the Korean National Police Service
The 2 offices are able to arrest, detect, and recover crimes. The Prosecution Service and the Korean National Police Service focus more on high-profile corruption and money laundering. The Criminal Asset Recovery Division is solely in charge of recovering criminal cryptocurrency assets.
Taxing and tax offenses
The National Tax Service is responsible for the investigation, fulfillment, and compliance of financial regulations related to tax. By-passing tax through crypto is not allowed in the country. The National Tax Service monitors asset movement via digital actions.
The Bank of Korea is moving to the next level of its central bank digital currency (CBDC) adoption which is real-world testing. During this step, the central bank plans to onboard commercial banks to check interoperability between the CBDC and their IT systems.
The experiment phase is about to be finished by the end of 2022. However, it could take a bit longer before the adoption will be completed. “Even if the CBDC research is completed, it will take a long time to actually introduce it”, an official from the Bank of Korea said.
Crypto taxes in South Korea
Recently, the authority imposed a 20% cryptocurrency tax on all trading. However, the regulation was extended to 2025 before it would be executed. Many people commented about the movement (20% tax). For example, Ki Young Ju, the CEO of CryptoQuant, said in all forms how the new tax would affect them, crypto traders, and the crypto market at large.
The law binding the cryptocurrency falls under the “tax virtual assets” in the country. It is a new tax regulation introduced in 2022. It was pending execution until it was further postponed by 2 years following the reasons and the general impact it may have.
Let’s take a look at the tax reform plan — taxation on the lending, transfer, and possession of virtual assets will not take effect until 2025. The 2 years break to set, and reform cases delayed the execution of the tax regulation. Although most regulations binding virtual assets are modified or postponed, the tax regulation of levying 20% tax on gross accumulation of assets above 2.5 million/annual remains unchanged.
Harold Kim, a South Korean blockchain advocate, said that the tax regulations target high scale virtual investors and traders. However, the tax regulation will also focus on small traders as the regulations affect more taxing on capital gains.
The latest news from the South Korean media mentioned that they are going to charge crypto airdrops and other free cryptocurrency distributions with a tax from 10% to 50% depending on each case.
The Ministry of Strategy and Finance states that any airdrop will be treated as a digital gift and, thus, taxed. The recipients of the free giveaways will be required to fill in the profit information into a special declaration within three months of receipt of the digital asset.
The new rule will enter into force on September 1, 2022.
South Korean crypto use cases
According to Statista, about 150 offline stores in South Korea accept crypto. The sum increased majorly from 2013 – 2017; however, it dropped in 2018 following the crash of the crypto market. 2017 owns the greatest number of companies, shops, and online transactions connected to crypto before the crash.
In 2021, a survey was conducted with the summary that about 7 offline stores would be established in Seoul, the capital of South Korea. The stores will accept cryptocurrency offline. The crypto methods are referred to as Bitcoin offline, accepted for payment options and other services.
As of April 2021, the number of Paycoin administration clients in South Korea grew from 781 thousand up to 1.4 million in the earlier year. Established in 2019, Paycoin is a blockchain-based idea of Danal Fintech.
The Paycoin (PCI) might be utilized to make a payment at different subsidiaries on the web and offline stores via the Paycoin app on your mobile. Since June 2021, local users can likewise pay with Bitcoin by switching it over completely to Paycoin in the application.
The future of crypto in South Korea
South Korea’s allocation of around $177.1 million into metaverse companies and jobs is a wary initial step into the future made by a government. It flags interest in an innovation that could become the dominant focal point in the future — and it could give an outline to others to follow.
Anyway, there are many issues that South Korea and different legislatures should address while entering the metaverse, whether utilizing the innovation to develop resident commitment further or concluding the job they will play as controllers of a quickly growing innovation.
It would be unfair to say that South Korea stays prohibitive of the crypto market. Last year, it executed guidelines to forestall monetary wrongdoing in trades and will apply the counter illegal tax avoidance venture out rule to crypto organizations this year. These are good steps; however, the cryptocurrency needs more promotions than do-or-die regulations.