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Calls for a crypto tax have drawn severe backlash in the country where crypto trading is ubiquitous.
Now, the governing party is set to delay the crypto tax, according to The Korea Times.
Due to diminishing support from young voters ahead of the upcoming elections in May, the government will ask regulators to delay the implementation by one year. So instead of on January 1, 2022, the tax will take effect in 2023.
Indeed, there were signs that this decision was coming.
Lawmakers from both the governing Democratic Party and the conservative People Power Party have proposed delaying the crypto tax.
Even the Democratic Party’s presidential candidate Lee Jae-Myung backed the deferral.
Initially, the tax had to come into effect in October. However, it delayed the tax due to an inadequate taxation infrastructure.
However, just recently, the government has stood firm by its law.
One week ago, the South Korean Deputy Prime Minister and Finance Minister said he still backed the tax into effect by 2022.
“Any further delay in the already postponed enforcement will lead to the loss of public trust in government policy and undermine stability in the legal system,” Hong Nam-ki said.
The Crypto Tax
The proposed tax would levy a 20% tax on all profits on crypto over $2,125. It should take effect by January 1, 2022.
The tax would not apply to any profits made on NFTs. This is because South Korea does not yet classify them as virtual assets.
Due to the popularity of crypto in South Korea, the proposed law faces an intense backlash from the public.
The policy change likely came due to the upcoming elections in May next year. Voters in their 20s and 30s will be crucial for the election.
Younger voters, traditionally loyal to the Democratic Party, were changing their loyalties due to the proposed law. Unfortunately, they also make the majority of crypto traders.
South Korea – Major Crypto Market
South Korea is a significant player in the crypto space, despite its relatively small population of just over 50 million.
The virtual asset market in South Korea trails only behind China and the United States.
Korean Won is the third most traded national currency for Bitcoin, behind USD and Euro, according to Coinhills.
The sizeable Korean crypto footprint is primarily due to the crypto-mania that is rocking the country.
The demand for crypto far surpasses that in other countries.
There are several reasons for the country’s infatuation with crypto. Firstly, the tech-savvy country has been quick to adopt global trends. This is especially true for the younger generation.
Secondly, young people in Korea are struggling, and promises of huge returns are incredibly alluring.
At present, youth unemployment in South Korea is three times as high as the national average.
One student said that many of his colleagues are taking laptops to class to track their holdings.
Due to the unprecedented demand coupled with capital controls, crypto has long been trading at a premium in South Korea.
Indeed, this gap even has a name – the kimchi premium. It ranged from 5% to 55% in 2018.