Bitcoin: South Korea to introduce '20% tax on cryptocurrency'

Industry-defining legislation could impact global crypto market

A bitcoin tax is being discussed by lawmakers in South Korea. (Getty Images/iStockphoto)

South Korea is considering reclassifying cryptocurrencies as "goods" rather than currencies, meaning bitcoin would be subject to tax rates as high as 20 per cent.

Discussions this week centred around amending existing laws in order to introduce a capital gains tax for cryptocurrency.

The move, which was reported by cryptocurrency publication CoinTelegraph, would mean that bitcoin and other "electronic certificates of economic value" will be viewed as a taxable asset.

"Until now, virtual assets have been recognised only as a function of currency and have not been subject to income tax, but recently virtual assets (like bitcoin) are increasingly being traded as goods with property value," a South Korean court said in their judgement.

"Considering various conditions, such as the recognition of intangible assets with property value, the necessity of taxation, and the recognition of the property value of virtual assets are being raised at the same time."

A taxation bill would have major implications for the country's cryptocurrency industry, and could potentially impact the global industry.

South Korea is one of the world's biggest hubs for cryptocurrency activity and is home to several large exchanges.

The country also has high levels of adoption, with a 2017 survey revealing that more than one in three people were active investors in cryptocurrencies.

The volume of bitcoin trading has fallen in recent months due to the economic impact of the coronavirus pandemic.

Data gathered by investment publication Invezz earlier this month revealed that South Korea had seen a 43 per cent drop in trading volume in 2020.

Despite the drop, the government has continued to push for industry-defining regulation for the nascent industry.

Earlier this year, the South Korean National Assembly passed one of the world's first comprehensive cryptocurrency laws in order to provide a legal framework for cryptocurrencies and exchanges.

The government is expected to announced the final details of the new taxation bill within the coming weeks.