South Korea mulls crypto tax, lifting ICO ban

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The South Korean government is looking at imposing a tax on cryptocurrencies, and regulation for initial coin offerings (ICOs).

The Korea Times reported that Finance minister nominee Hong Nam-ki, during his confirmation hearing, had issued a prepared statement enumerating the taxation plan, which will take into account practices elsewhere in the world.

Hong said, “A task force consisting of experts from relevant government agencies including the National Tax Service and the private sector will be formed to examine overseas examples and hammer out the taxation plan.” Currently, according to him, there was “no internationally agreed regulatory framework” for cryptocurrencies, which he called “a new phenomenon.”

He also expressed concerns of “such lingering problems as the market overheating and investor protection. Therefore, we need to be careful in building the regulatory framework.”

Hong said that ICOs, which were prohibited in the country in September 2017, will be considered for regulation instead, with other markets to be monitored before a decision is made.

“We will determine our policy orientations on ICOs with relevant agencies after reviewing the results of the financial regulator’s market survey and getting feedback from experts,” Hong said. The survey had local blockchain companies providing their input on the matter.

Hong had made similar statements in support of allowing ICOs, as chief of the Office for Government Policy Coordination. The country’s National Assembly is also recommending the lifting of the ban, after which regulations could be legislated.

Cryptocurrency exchanges in the country have enjoyed preferential tax rates, being classified like venture companies, but the government indicated last October that higher rates were coming for such firms.

Hong said, “We will do our utmost to nurture blockchain technology as nine out of the 10 business types classified as blockchain-related businesses by Statistics Korea excluding the crypto exchanges can be still acknowledged as venture companies.”

The exchanges, however, have recently benefited from the government’s clarification that banks need not worry of legal issues when dealing with cryptocurrency-related businesses, as long as the usual anti-money laundering/know-your customer (AML/KYC) requirements were met.

South Korea is a member of the G20 forum, that recently issued a joint declaration calling for regulation of cryptocurrencies in line with standards of the Financial Action Task Force (FATF), of which the country is also a member.