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Cryptocurrency Tax in South Korea Delayed to 2027 for Breathing Room

2024-12-03

South Korea's cryptocurrency firms are set to gain some respite as the government has decided to postpone the implementation of capital gains tax on cryptocurrencies by two years. This move comes as a relief for the industry, which has been facing uncertainties regarding the tax regulations.

South Korea's Crypto Tax Delay: A Boon for Firms

Delaying Cryptocurrency Tax Policy

For the second time, South Korean authorities have announced that the capital gains tax on cryptocurrencies, which was scheduled to be introduced in January 2025, will not be pushed through. The current political situation in the country has made it difficult to implement the tax in the next year, and it has been deferred until 2027. The Democratic Party of Korea floor leader Park Chan-dae stated on Sunday that they have reached an agreement to postpone the taxes on profits from cryptocurrency trades. "We have decided to agree to a two-year moratorium on the implementation of the cryptocurrency taxation proposed by the government and ruling party," Park said. Despite reports suggesting that the KDP and the ruling People's Power Party have reached a political deal inclined towards a looser approach to taxing crypto gains, a two-year suspension has been agreed upon. Earlier, the People's Power Party proposed to delay the new crypto taxation until January 2028.

Increase Tax-Deductibles

Previously, the Democratic Party opposed the tax moratorium and proposed increasing the tax deductibles instead. Under their initial proposal, the legislators suggested hiking the tax-deductible from the threshold of 2.5 million won to 50 million won, with the aim of implementing the law without any delay. As of today, the market cap of cryptocurrencies stands at $3.37 trillion. However, on Sunday, the party concurred with other South Korean lawmakers to move the implementation date. Meanwhile, Park made it clear that their party would not agree on the government's legislative measures on inheritance and gift tax bills that would "benefit the super wealthy." The South Korean government wanted to reform the country's inheritance tax law by imposing a lower tax rate of 50% to 40% while increasing the deduction thresholds for children inheriting from parents.

Assessing The Law's Impact

Park said that delaying the introduction of the law by two years will give the South Korean government legislators ample time to evaluate the impact of imposing taxes on profits earned from digital assets. Cryptocurrency traders will also have two more years to prepare before being charged on the income they earned from virtual currency trading. Once implemented, South Korean cryptocurrency investors will have to pay a 20% capital gains tax from trading in digital assets. The South Korean government initially aimed to implement a crypto tax in 2021 but was delayed until 2023 due to concerns about its adverse effect on the local cryptocurrency market. The projected 2023 implementation was later postponed and was supposed to be imposed in January next year. But once again, the timeline has been moved further to 2027.

The XRP token, closely associated with Ripple Labs, has achieved a remarkable feat by becoming the fourth-largest cryptocurrency globally in terms of market cap. This surge was triggered by President-elect Donald Trump's election win in November and the subsequent speculation about the SEC potentially dropping its legal case against Ripple. Let's delve deeper into the details.

Key Highlights and Market Movements

The price of XRP witnessed a significant upward trend. Early on Monday, it rose above $2.50 and then dropped slightly to $2.30, registering a 21% surge over the past 24 hours and nearly a 50% increase compared to the previous week. Since Trump's electoral victory, its market cap has soared from around $30 billion to an astonishing $131 billion on Monday. Over the weekend, XRP's market cap crossed $100 billion for the first time since 2018, overtaking Solana's SOL and becoming the world's fourth most valuable cryptocurrency. It also briefly surpassed Tether's USDT stablecoin market value early on Monday before settling slightly lower. Meanwhile, Bitcoin, with its value hovering around $100,000 in the past week, remains the world's most valuable cryptocurrency with a market cap of nearly $1.89 trillion, followed by the Ether token with a market cap of $436 billion.

What Fueled The Xrp Surge This Weekend?

The steady rise in XRP's price since election day was further accelerated over the weekend. Fox Business reported that the New York Department of Financial Services might soon approve the launch of Ripple's RLUSD stablecoin. The report suggested that the company could be preparing to launch RLUSD as early as December 4. This news had a significant impact on XRP's market sentiment.

News Peg and Regulatory Implications

Ripple Labs, the developer of the XRP payment protocol and the user of the token for its payments platform, faced a legal battle with the Securities and Exchange Commission in 2020. The agency accused the company of selling XRP tokens without proper registration. However, last year in July, a federal judge ruled that Ripple did not violate securities law by selling the token on public exchanges. In October this year, the SEC appealed the ruling before the U.S. Court of Appeals for the Second Circuit. The election of President Trump and the announcement by SEC chair Gary Gensler that he is stepping down in January have triggered speculation about the Ripple case. Former Commodity Futures Trading Commission (CFTC) Chairman Chris Giancarlo, who is a top contender to serve as the "Crypto Czar" in the incoming Trump administration, expressed his view that the SEC should drop the case against Ripple. This has added to the positive sentiment surrounding XRP.

What To Watch For

In a post on X last week, Ripple CEO Brad Garlinghouse mentioned that CBS News' 60 Minutes program had interviewed him. The interview focused on crypto, the push for regulatory clarity, and how the industry came together to advocate for pro-innovation candidates through Fairshake PAC. This indicates the importance of regulatory clarity in the cryptocurrency space.

Key Background and Policy Shifts

The post-election cryptocurrency surge is driven by the expectations of a more crypto-friendly regulatory environment under the Trump and the GOP controlled Congress. During his campaign, the President-elect adopted a pro-crypto stance and promised to make the U.S. the "crypto capital of the planet." This was a significant departure from his earlier stance when he labeled Bitcoin as a "scam" and a disaster waiting to happen.

President-elect Donald Trump is on the verge of revealing his pick for the new chair of the Securities and Exchange Commission (SEC). With an official announcement potentially set for as early as tomorrow, the crypto world and the financial sector are on tenterhooks. Gary Gensler, the current SEC Chair, is set to step down in January 2025, marking the end of an era. His tenure has been characterized by an aggressive stance towards cryptocurrency firms, drawing heavy criticism from the crypto community.

Leading Candidates and Their Stances

Among the prominent contenders to succeed Gensler is Paul Atkins, a former SEC commissioner who is a staunch advocate for deregulation. He believes in creating a regulatory environment that encourages innovation while safeguarding investors. Another candidate is Hester Peirce, a current SEC commissioner who has been critical of Gensler's enforcement-heavy approach. She advocates for a balance between innovation and investor protection. Mark Uyeda, yet another commissioner under consideration, has pushed for clearer guidelines and enhanced collaboration with the industry. His stance indicates a potential shift in the SEC's stance under new leadership.

Gary Gensler's Impact

During his tenure, Gensler pursued numerous enforcement actions against crypto firms, leaving the industry in a state of widespread uncertainty. His approach was seen by many as overly aggressive, becoming a focal point of criticism from crypto advocates. However, his actions also aimed to protect investors and maintain the integrity of the financial markets. The end of his leadership marks a significant turning point for the SEC.

Industry Reactions and Optimism

The possibility of a more crypto-friendly SEC has injected a sense of optimism into the industry. Tron founder Justin Sun even jokingly offered Gensler a job in the blockchain sector, highlighting the polarized views on his legacy. Trump's campaign promise to overhaul US cryptocurrency regulations and appoint a new SEC chair aligns with this sentiment. It is expected that the new chair will introduce reforms that promote innovation-friendly rules for digital assets, shaping the future of the crypto market.

Transition and Future Outlook

The transition from Gensler to a new SEC chair is not just a change in leadership but a potential shift in the regulatory landscape. It will determine how the SEC approaches cryptocurrency regulation in the coming years. Will it continue with an enforcement-heavy approach or adopt a more balanced stance? The answers to these questions will have a significant impact on the growth and stability of the crypto industry. As we await the official announcement, the crypto community and the financial world watch with bated breath.