Key Takeaways:
- The South Korean government is considering delaying the cryptocurrency gains tax from January 2025 to January 2028.
- Service providers in South Korea are now legally required to keep at least 80% of user crypto deposits in cold storage
The South Korean government, along with the ruling party, is considering postponing the tax on cryptocurrency gains from January 2025 to January 2028 in the upcoming tax revision proposal.
This proposed delay aligns with the introduction of South Korea’s first comprehensive set of crypto regulations, which are set to take effect in July. The final election promises from the ruling party will be confirmed by the end of the month.
The primary goal of this groundbreaking legislation is to create a safer environment for investors in the digital asset market.
The new law mandates insurance coverage, reserve funds, and extensive record-keeping to ensure the financial stability and security of crypto operators. By implementing these measures, South Korea aims to build investor confidence and encourage responsible practices within the cryptocurrency industry.
This regulatory framework follows recent efforts by South Korean crypto exchanges to prevent mass delistings in anticipation of the new rules.
In a press release, the Financial Services Commission (FSC) stated, “The implementation of the Virtual Asset User Protection Act will establish a foundation to provide safe protection for users. As it becomes possible to bring severe penalties against those engaging in unfair trading activities, it is also expected to help establish a sound order in the virtual asset market.”
The act imposes stringent requirements on digital asset exchanges. Service providers in South Korea are now legally required to keep at least 80% of user crypto deposits in cold storage, separate from their own funds.
Additionally, exchanges must delegate the custody of users’ cash deposits to a licensed local bank and maintain cryptocurrency reserves equal to customer deposits. Crypto services in Korea must also enroll in adequate insurance or set up a reserve fund to prepare for hacks or liquidity crises.
VASPs must ensure that customers’ deposits are safely kept at banks and must pay interest on those deposits. They must also keep users’ virtual assets separate from their own and maintain custody of the types and volume of assets their customers hold.
The law prohibits the use of material nonpublic information, market price manipulation, and acts of unfair trading that disturb market order. These provisions are similar to those in the Financial Investment Services and Capital Markets Act.
