[Exclusive] Korea Tax Think Tank Flags Fairness Concerns Over Crypto Tax While Stocks Go Untaxed

The Korea Institute of Public Finance, a state-run research institute, has raised concerns over the fairness of taxing virtual assets, or cryptocurrencies. With the levy set to take effect next year, calls for another delay are growing in both the industry and political circles.

According to government officials on October 13, the institute shared the status of South Korea’s virtual-asset taxation at the Korea-China International Tax Symposium held in Shanghai last month. Attendees included Lee Young, president of the Korea Institute of Public Finance, as well as the Institute of Taxation Science under China’s State Taxation Administration, the Shanghai Tax Bureau and the Guangdong Tax Bureau’s Institute of Taxation Science.

At the symposium, the institute cited tax fairness as a key issue in South Korea’s virtual-asset tax regime. It said taxing only virtual assets would inevitably fuel fairness concerns after the financial investment income tax was abolished.

To improve fairness, it proposed raising the basic deduction and allowing loss carryforwards. The institute also noted at the symposium that South Korea’s basic deduction for virtual-asset taxation stands at 2.5 million won, or about $1,810, compared with about 5.3 million won, or roughly $3,840, in the U.K. and about 4.13 million won, or around $2,990, in Germany, according to people familiar with the matter. A loss carryforward allows losses from past investments to be deducted from gains in the following year when calculating tax liability.

The institute also identified limits in the system for collecting tax information. Countries participating in the Organization for Economic Cooperation and Development’s Crypto-Asset Reporting Framework, or CARF, are introducing it on different timetables, raising the possibility of blind spots if South Korea starts taxing crypto next year. Hong Kong, Singapore and the United Arab Emirates will adopt CARF in 2028, while the U.S. plans to do so in 2029.

It also called for improvements in tax-administration infrastructure. The point, people familiar with the matter said, was that tax authorities still lack adequate systems to accurately track virtual-asset transactions and acquisition costs. The institute also mentioned bringing decentralized exchanges, or DEXs, into the regulatory framework as another issue authorities need to address, given the difficulty of tracing transaction records there.

Calls for Delay Gain Traction as Investors Warn of an Exodus

Calls to delay the tax are spreading in and around the industry. Public petitions submitted to the National Assembly seeking either repeal of the tax or an additional two-year delay have each already drawn more than 50,000 signatures and been referred to the relevant standing committee. Some crypto investors have also been staging truck protests since October 12 near the National Assembly and the Government Complex Seoul, urging a postponement.

The political response has been similar. Kweon Seong-dong, floor leader of the People Power Party, met Deputy Prime Minister Lee Hyoung-il late last month and asked for a delay. Lee also serves as finance minister. In the Democratic Party, lawmakers Min Byoung-dug and Park Min-kyu have also recently raised the need for a postponement. Lee softened his stance at a parliamentary audit earlier this month, saying authorities would "broadly gather a wide range of opinions" on whether to proceed with the tax as scheduled.

There are also concerns that pressing ahead could trigger an exodus of crypto capital from South Korea. In a recent survey of 2,423 domestic crypto investors by Tiger Research, a South Korean Web3 research firm, 69.7% of respondents said they would reduce their crypto investments or stop investing altogether if the tax takes effect.

Tiger Research estimated that if the tax is introduced next year, trading volume at South Korea’s three largest crypto exchanges — Upbit, Bithumb and Coinone — could plunge by nearly 30% to about 602 trillion won, or $436 billion, next year from about 860 trillion won, or $623 billion, this year. "If taxation begins before tax standards and reporting systems are fully in place, domestic trading could shrink and some activity could move to overseas exchanges and private wallets," Ahn Kwang-ho, a researcher at Tiger Research, said. That would further disperse the transaction data tax authorities need to verify, making it harder to secure tax revenue and supervise the market, he added.