Min Byung-duk Says Crypto Tax Should Allow at Least Five Years of Loss Carryforwards

Min Byung-duk, a lawmaker from South Korea's Democratic Party, said the country should allow investors to carry forward losses for at least five years before imposing taxes on virtual assets, so those losses can be deducted from future gains.

In a Facebook post on September 22, Min said crypto taxation should not ignore losses while taxing gains, criticizing the current framework for not allowing adequate loss carryforwards.

He said that if an investor records a 10 million won loss on virtual-asset investments in the first year and then earns a 10 million won profit the following year, cumulative gains and losses over the two years would be zero. Under the current system, however, that investor would still owe 1.65 million won in taxes in the second year.

Min said the U.S. and the U.K. apply capital gains and loss rules to virtual assets, allowing investment losses to be carried into future tax years and deducted. He said South Korea should also introduce a loss carryforward period of at least five years. Domestic research has also confirmed that major countries including the U.S. and the U.K. recognize carryforward deductions for crypto losses.

He also cited uncertainty over how acquisition costs should be calculated. The relevant standards have been left to a presidential decree, he wrote, and the rules should not be so unclear that investors end up paying more tax than they actually owe or bear responsibility for filing errors.

Min said he supports taxing virtual assets in principle, but argued that the tax infrastructure must come first. He said he agrees with the principle that income should be taxed, but that the foundation for collecting those taxes fairly must be in place before enforcement begins.

He said the first exchange of data under the Crypto-Asset Reporting Framework, or CARF, is scheduled for 2027. If taxation begins before overseas trading data is sufficiently secured, the burden could fall disproportionately on users of domestic exchanges. That could push trading activity offshore and reduce revenue for South Korean virtual-asset businesses, along with related tax receipts.

Min also said the government should disclose in advance both the expected tax revenue effect and the administrative costs of crypto taxation. He said South Korea should, like the U.K., present the revenue impact by implementation date alongside administrative costs and the reporting burden on investors, just as Britain disclosed expected tax revenue, government implementation costs and business compliance costs tied to CARF.

He proposed delaying the start of crypto taxation until after passage of his proposed Digital Asset Basic Act. Under the plan, the legal status of staking, lending, airdrops and hard forks, as well as investor protections and business responsibilities, would first be established through the bill, with taxation beginning when overseas transaction data is actually available. Publicly available bill records also confirm that Min introduced the framework legislation aimed at establishing a broader legal regime for digital assets.

"We're not trying to avoid taxation. We're trying to collect it properly," Min wrote, adding that authorities should strengthen enforcement against unfair trading practices and bolster investor protection during the preparation period.