South Korea Looking to Tax Bitcoin Users
South Korea’s deputy prime minister and minister of strategy and finance, Kim Dong- yeon, revealed earlier this week that the government is investigating methods to regulate the local Bitcoin market and tax Bitcoin users accordingly. Although South Korea is exploring policies on Bitcoin taxation, Kim mentioned the government does not intend on adding a Bitcoin taxation policy in 2018’s amendment of the tax law. Several countries are investigating ways to tax Bitcoin users, and as a result chipping away at the decentralized aspect of digital currencies. Currently a lot of macroeconomic factors are emerging and potentially influencing or will influence the price of digital currencies. As cryptocurrency becomes more centralized due to government interactions Bitcoin may grow at a slower pace than we have seen in the recent past. Being able to take out gains tax free is extremely attractive for investors, however, the returns that we have and may continue to see in the recent future are going to increase demand and popularity.
South Korea is likely to adopt a similar taxation policy that has been implemented by Japan. Since the beginning of the year South Korea’s government has introduced some light regulations for Bitcoin businesses. These regulations are similar in structure to policies implemented by the Japanese government and financial service agency. South Korea may also develop a similar strategy implemented by the Japanese government to influence growth in the cryptocurrency market. The Japanese government eliminated the eight percent consumption tax on Bitcoin in July, with intentions of sustaining the rapid growth rate of the Japanese Bitcoin industry. South Korea will implement a similar Bitcoin tax policy providing freedom and flexibility.
Currently some of South Korea’s largest and most influential financial institutions, for example Shinhan, have begun testing bitcoin wallet and vault systems. Shinhan, is the country’s second largest commercial bank, with a long term strategy to provide a safe and secured platform, so Bitcoin users can store more funds. Shinhan made it apparent that a vault service is needed for large scale investment firms and institutional investors, especially given that Bithumb was hacked twice this year. Moving forward, it appears to be optimistic that the South Korean government has begun to acknowledge the rapid growth rate of Bitcoin, and is exploring solutions to standardize the South Korean Bitcoin industry.