South Korea is a country with a developed economy, with a transparent payment and settlement infrastructure. Money is moved quickly, safely, and cheaply here, using a bank transfer system and various applications. South Korean cryptocurrencies are subject to the legal framework and have free circulation. However, representatives of the financial regulator believe that Korea can do without a digital currency. Although its implementation in the financial system of countries can make a difference.
High-level countries can use its introduction to ensure the sustainability of the financial structure. States with weak economies can benefit from the use of digital technologies to reduce the cost of processing cash.
Documents defining the status of cryptocurrency in Korea
Cryptocurrency laws in South Korea do not prohibit ownership, mining, issuance, trading. However, since the government legalized the cryptocurrency on March 5, 2020, legislative amendments have been required. How did this threaten the market participants? The changes primarily concerned exchanges, funds, platforms that own ICOs, and electronic wallets. I think that not everyone liked that they were required to use bank accounts and real names, identify their users, and have a certificate for the security management system. The new measures were taken already in January 2021. The regulators of cryptocurrency transactions in Korea are:
- Korea Financial Intelligence Unit;
- Financial Services Authority;
- South Korea Financial Services Commission (FSC).
The difficulty with cryptocurrency in Korea, in my opinion, is that the introduction of a 20% tax on income from crypto trading is more likely to damage the cryptocurrency industry. This currency is quite popular among the population. The prosecution of crypto exchanges by the authorities, accusing them of falsifying trades, does not add to the popularity of the sites. And with the introduction of new standards, many cryptocurrency exchanges and other services may close.
Currently, Korea has already lost its position as one of the leaders in the global turnover of digital assets. The new rules provide for:
- a ban on transactions with assets that create a risk of money laundering, in other words, with anonymous cryptocurrencies, including Dash, Zcash, Monero;
- transactions that involve gift cards, vouchers, and points for which you can purchase coins may be considered illegal and risky;
- banks and exchanges will be able to accept transfers of digital coins only from accounts that have verification, for all other organizations will be fined;
- trading platforms should not store funds in their own wallets, but only in officially recognized custodial services.
My opinion coincides with the statements of experts that all such prohibitions and restrictions can generally bury the industry.
Changes in 2021 The introduction of the new law on income tax from cryptocurrency transactions was scheduled for October 2021. However, the parliament postponed its start to January 2022. This is done with a reasonable goal – to give crypto exchanges a chance to prepare for the fact that they will be included in the financial infrastructure, within which it is planned to implement all the requirements of the law. In accordance with the new tax structure for a resident, annual income over 2.5 won or $ 2,260 million from cryptocurrency trading will be taxed at 20%. Anything less than this amount is not taxed. Cryptocurrency is still popular, both in South Korea and around the world. Korean authorities and regulators in other countries are taking measures to combat anonymous money laundering using cryptocurrency.