Proposal for 2-Year Deferral of Crypto Taxation — September Parliamentary 'Big Match' Begins

Hello, community manager Nari here. With the September National Assembly session approaching—a major turning point for the virtual asset market—many are paying close attention. This session will focus on key issues that will directly impact the daily lives of investors: whether to defer the 'virtual asset tax' and the 'Phase 2 Virtual Asset Act' designed to lay the foundation for the market. I will calmly summarize the key issues currently under discussion and what changes might be coming our way.

The '2-Year Deferral' Card Instead of Abolishing Taxation — Income Tax Act Amendment Proposed

On August 28th, Representative Kim Sang-hoon of the People Power Party introduced an amendment to the Income Tax Act (Bill No. 2220914) to delay the taxation of virtual assets by two years, from 2027 to 2029. This represents a pragmatic compromise, stepping back from the ruling party's previous push for a full 'abolition' of the tax in favor of a more feasible 'deferral' plan.

The justification for the deferral presented in the amendment is quite specific. Primarily, it cites that the tax administration infrastructure capable of precisely tracking overseas on-chain transactions, such as those on decentralized exchanges or DeFi platforms, is not yet properly established in Korea. Additionally, the fact that the international standard for information exchange, the Crypto-Asset Reporting Framework (CARF), is not set to be fully operational until 2029 is presented as a core reason.

The point is made that if taxes are hastily imposed based only on domestic transaction data before international transaction information is properly integrated, it will inevitably lead to disputes over fairness. The argument holds that rushed taxation without proper preparation could instead trigger an exodus of investment capital abroad, necessitating a more cautious approach.

National Assembly Budget Office's Compromise — 5-Year Loss Carryforward and 6 Million KRW Basic Deduction

A research report published by the National Assembly Budget Office highlighted the key issue that virtual asset income is currently classified simply as 'other income,' which does not allow for loss carryforwards. In simple terms, if you lost 5 million KRW investing in virtual assets last year and earned 5 million KRW this year, you would have to pay full tax on this year's gains despite having no overall profit. The report points out that while standard stock investments allow for loss carryforwards—offsetting losses against gains in subsequent years—excluding virtual assets from this is inequitable.

Accordingly, the report suggested allowing loss carryforwards for up to five years. It also recommended raising the tax-exempt basic deduction from the current 2.5 million KRW to at least 6 million KRW. Significantly widening the deduction limit would greatly reduce the administrative hassle and cost burden for retail investors who would otherwise have to file complex tax returns for very small profits. With these practical institutional improvements being brought to the table alongside the push for unconditional tax deferral, the scope of parliamentary discussion is expanding.

Speeding Up the Phase 2 Virtual Asset Act: '20% Voting Rights Restriction' for Major Shareholders Emerges as Compromise

Along with tax issues, the legislative discussion on the Phase 2 Virtual Asset Act, which will complete the institutional foundation of the market, is moving rapidly. There is a busy push to prepare a unified bill within September, led by the Financial Services Commission and Representative Yoo Dong-soo of the Democratic Party of Korea, who serves on the National Policy Committee. One of the biggest points of contention in this bill has been how to handle the excessive influence of major shareholders in virtual asset exchanges.

While there was originally strong support for a somewhat aggressive measure to forcibly restrict the percentage of shares held by major shareholders, a more rational compromise reflecting market concerns has emerged. The method involves allowing actual share ownership but capping voting rights at shareholder meetings to a maximum of 20%. This appears to be a realistic compromise that prevents unilateral decision-making by controlling shareholders while avoiding controversies over property rights infringement.

However, the financial authorities are maintaining a very conservative stance regarding regulatory easing measures that were expected to provide relief to exchanges. Specifically, the Financial Services Commission has firmly opposed the lifting of the 'one exchange, one bank' real-name account restriction, which exchanges have been requesting for a long time. The reason is that it would be difficult to properly monitor an exchange's anti-money laundering capabilities if it were partnered with multiple banks. The Commission remains steadfast in its cautious position that transparent control of money flow must come first until the system is fully established and stabilized.

Key Points to Watch in the September National Assembly Session

This September National Assembly session seems likely to be a critical period for laying the foundation of the domestic crypto market as it grapples with major issues like tax deferral and the enactment of the Phase 2 Virtual Asset Act. It is worth keeping an eye on whether a realistic compromise on the taxation method will be reached and how the agreement surrounding the restriction of voting rights for exchange major shareholders will be finalized. I will continue to calmly observe market changes and keep you all updated with any new developments.