- South Korea is one of the biggest cryptocurrency markets in the world.
- Cryptocurrency exchanges need to register to the revised financial legislation act by 24th September.
- Income from cryptocurrency trading will be taxed in S Korea by 2022.
In South Korea, cryptocurrency trading is gaining fast-growing popularity, specifically amongst the young generation. Cryptocurrency trading soared toward the end of 2020 in the country due to various factors. One of those factors is the increased rate of unemployment. Crypto trading market growth has given financial stability and prosperity in the midst of the pandemic-Covid in 2020 S. Korea is believed to be the 3rd highest market for crypto after the US and Japan. Having said that, crypto trading and exchange platforms are not considered legal. They are closely monitored by the government regulatory system. Crypto trading has been under close scrutiny by the South Korean government and is rumored to get banned.
In 2017, the government made a strict change in legislation and banned anonymous trading. They also implemented bans for local financial institutes to host bitcoin trading. Furthermore, they imposed stricter rules for traders to open a “real name bank account”. They also only allowed trading between dealers who have the same real name bank account.
Strict regulation on cryptocurrency and exchanges in South Korea
Recently the financial services commission (FSC), Eun Sung-soo has recently announced a new regulation for cryptocurrency exchanges. All the exchanges need to register with FSC under the new funds’ act. This revised act is formed in order to mitigate any scope of illegal and forgery conduct in cryptocurrency trading. This amended bill passed into effect on March 25. However, Eun confirmed that no exchanges have yet registered to the revised bill. It’s mandatory for all the exchanges to register to the new regulation by 24th September. Failing to do so will prohibit them to trade in South Korea.
It is mandatory for exchanges to meet all the requirements of the revised act such as obtaining information security management system (ISMS) certification and issuance of real-name accounts. Cryptocurrency exchanges are not yet sure if they can meet the requirements, specifically real-name accounts and it may lead to mass shut down of exchanges in S. Korea.
Cryptocurrency investment doesn’t come under the income category yet for traders in S. Korea.However, it’s confirmed that income from cryptocurrency investment will be classified as other income and it will be taxed at 20% rate.The new taxation rule will be applicable from Jan 2022 with tax reporting required from June 2023.
Currently, the cryptocurrency market is facing a regulation process across the world. This market is considered new, unstable and fast growing. However, it’s been identified that the main problem is that not any government has issued a regulation document based on cryptocurrencies markets or still the regulations are not really clear for traders. On the 21st of May, the crypto market was impacted by the news of the Financial China Committee that China will take strict restrictions on Bitcoin (BTC) training and mining.
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