"Delay for 1 Year" vs "No Grace Period"... Party and Government Tug-of-War Over 'Coin Taxation'

Government to Tax Virtual Assets Starting January Next Year
Ruling Party Voices Call for One-Year Grace Period
Considering Sensitive 2030 Voter Sentiment on 'Coin Policy'
Hong Nam-ki Maintains Stance: "No Taxation Issues Next Year"

Taxation on income earned from virtual currency transactions such as Bitcoin is scheduled to begin in January 2022, but voices from the ruling party are calling for a one-year deferral. / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] The taxation of virtual currencies has become a hot issue in the political arena. Previously, the government announced a plan to apply income tax on earnings from virtual currency transactions such as Bitcoin starting January next year, but voices from the ruling party have emerged calling for at least a one-year postponement.

Investment in virtual currencies has been very popular among the 20s and 30s age group. The youth have been sensitive to virtual currency-related issues since last year. With the presidential election approaching next year, the ruling party is seen as having no choice but to push this issue firmly to capture the youth vote.

◆Virtual Currency Taxation to Begin Next Year... Ruling Party Calls for "Postponement"

Virtual currency taxation is based on the 'Income Tax Act Amendment' to be implemented from January 2022. This bill separates capital gains from virtual currency transactions as 'other income' and applies a 20% tax rate, implementing separate taxation.

The Ministry of Economy and Finance announced the introduction of virtual currency taxation last July when it revealed the tax law amendment, and after the law was amended in December of the same year, the Enforcement Decree of the Income Tax Act was promulgated in February.

Kim Byung-wook, a member of the Democratic Party of Korea and the secretary of the Virtual Asset Task Force (TF), stated, "We intend to postpone virtual asset taxation for one year." / Photo by Yonhap News

However, recently, voices from the ruling party have called for at least a one-year postponement of the virtual currency taxation plan. Kim Byung-wook, a member of the Democratic Party's Virtual Asset Task Force (TF), stated at a press conference on the 2nd, "We criticize the obstinacy of the Ministry of Economy and Finance and the National Tax Service, which only adhere to principles, and intend to postpone virtual asset taxation for one year."

He added, "I have already expressed concerns through government questioning and the national audit about pushing taxation without proper preparation and social consensus," and pointed out, "While I agree with the tax principle that taxation applies where income exists, the concept of virtual assets is not even properly defined at this time." Some Democratic Party lawmakers have also proposed amendments to the Income Tax Act to postpone virtual currency taxation.

◆Ministry of Economy and Finance Maintains Position... Party-Government Conflict Intensifies

On the other hand, the government maintains its stance to proceed with taxation as scheduled. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, repeatedly emphasized at the National Assembly's Planning and Finance Committee audit last month, "There is no problem with taxing virtual asset income next year."

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance / Photo by Yonhap News

Regarding criticisms that the taxation infrastructure is not yet in place, he responded, "I think there is no problem," and added, "There are reports that preparations are insufficient, but we will thoroughly review this as well."

As neither the government nor the ruling party is willing to yield, tensions are escalating. On the 3rd, the Democratic Research Institute, a representative policy think tank of the Democratic Party, held a public debate on postponing virtual asset taxation. Since the Democratic Research Institute is responsible for researching and designing party-level pledges, some speculate that postponing virtual currency taxation could become a future election pledge of the Democratic Party. This essentially means a potential clash between the party and the government.

◆Voters in Their 20s and 30s Sensitive to 'Coin Policy'

The Democratic Party's attempt to delay the timing of virtual currency taxation is seen as targeting the votes of the 20s and 30s age group. The youth currently act as major players in domestic virtual currency investment and have shown very sensitive reactions to policies related to virtual asset investment.

According to the status of investors at Korea's four major virtual currency exchanges (Bithumb, Upbit, Korbit, Coinone) disclosed by Kwon Eun-hee of the People Power Party, among 2,495,289 newly established real-name accounts in the first quarter of this year (January to March), 63.5% (1,584,814) were from the 20s and 30s age group. This means that more than six out of ten new virtual currency investors are young people.

A Blue House petition urging former Financial Services Commission Chairman Eun Sung-soo to voluntarily resign / Photo by Blue House petition board capture

When former Financial Services Commission Chairman Eun Sung-soo said on April 22 at the full meeting of the Political Affairs Committee that "the government cannot protect all virtual currency investors," the youth reacted strongly.

At that time, when Chairman Eun was criticized for the government's insufficient protection of virtual currency investors, he said, "I do not think that because many people invest, they must be protected, and if they go down the wrong path, adults should talk to them." On the Blue House's petition board, a petition calling for his voluntary resignation was posted and received over 200,000 endorsements.

Experts predict that in the current unstable real economy situation, young voters' interest in virtual assets will increase further.

Professor Kim Taegi of Dankook University's Department of Economics argued, "There are reasonable reasons why virtual assets are a hot topic among young people."

He explained, "Generally, it is because their income is unstable. They have no jobs, and even if they get employed, there is no guarantee that their life will improve with a low salary, so they find virtual assets attractive despite knowing the high risks. If the current situation continues, the number of people interested in virtual assets will increase."

This content was produced with the assistance of AI translation services.