[Opinion] Virtual Currency and the Responsibilities of the National Assembly

Member of the National Assembly Kim Nam-guk's failure to disclose his cryptocurrency holdings in the high-ranking public officials' asset declaration has sparked social controversy. Even if it is not legally problematic, this behavior exploits a loophole in the law amid the absence of an established tax system for cryptocurrencies, and it is regrettable that the party responsible for this tax deferral is the National Assembly itself.

At this point, we examine the role of the National Assembly regarding cryptocurrencies. Today, almost all economic activities are mediated by currency. Naturally, if the currency system is unstable or unclear, it causes confusion in the economy. When we think of currency, we generally imagine a single legal tender. As a result, various cryptocurrencies seem unfamiliar. However, looking at the history of currency, cryptocurrencies are not entirely new. In the past, when state control did not extend nationwide or central banks were underdeveloped, various forms of transaction media equivalent to currency issued by local powers or individual banks were used in the economy. This necessitated protection measures for state-issued currency, and the National Assembly guaranteed its value through legislation, leading to the current legal tender system.

Examining the history of the United States, a country formed by multiple states, helps understand the legal tender protection system. Before the establishment of the Federal Reserve System (Fed), governments or local banks in each state issued currency directly, and many companies paid wages in coupons exchangeable for specific goods, functioning like currency. To protect legal tender, the U.S. Congress established the central banking system and legislated a currency circulation tax in 1865, imposing a 10% tax on all individual currencies other than the legal tender designated by Congress. Although this law became largely obsolete after modernization, it remained in effect until 1976 when the U.S. tax authorities (IRS) simplified the legislation. The U.S. Congress that repealed this law likely did not foresee the rapid technological changes leading to the current proliferation of cryptocurrencies. However, American legal experts are now reconsidering the appropriateness of the currency circulation tax.

Currently, there are too many institutions issuing cryptocurrencies and various types of cryptocurrencies. While this is natural in a free-market economy, the government and the National Assembly also have roles from the perspective of market stabilization and citizen protection. In fact, even without a currency circulation tax system, the market self-regulates by discounting cryptocurrencies that fall below face value, have low liquidity, or lack stability, distinguishing them from legal tender. Nevertheless, it may be appropriate to introduce a currency circulation tax at least on securities-type cryptocurrencies directly listed and issued by exchanges and stablecoins issued with a fixed value pegged to legal tender such as the U.S. dollar. Protecting and guaranteeing legal tender through this is the responsibility of the National Assembly.

Neglecting this role of the National Assembly and exploiting loopholes in the deferral laws they established to misuse cryptocurrencies as gaps in asset declarations is again worthy of criticism. Furthermore, the currency circulation tax also has implications for local currencies led by local governments. That is, while the National Assembly and central government respect the administration of local governments and do not interfere with the issuance of local currencies, imposing an appropriate circulation tax on them would be a compromise of conflicting interests.

Kim Gyu-il, Professor at Michigan State University

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