Min Byung-deok Calls for Five-Year Crypto Loss Carryforward Before Taxation

Rep. Min Byung-deok of the Democratic Party of Korea said South Korea should allow investors to carry forward virtual-asset losses for at least five years before imposing taxes on the sector.

In a Facebook post on September 22, Min wrote that the government should not tax gains while ignoring losses, criticizing the current framework for lacking a loss carryforward provision.

He said that if an investor records a 10 million won loss on virtual-asset investments in the first year and then posts a 10 million won profit the following year, the cumulative gain over the two years would be zero. Under the current system, however, that investor would still have to pay 1.65 million won in tax in the second year.

Min said the U.S. and the U.K. apply capital gains and loss rules to virtual assets, allowing investment losses to be carried forward and deducted in future tax years. He added that South Korea should also adopt a loss carryforward period of at least five years. Domestic research has also found that major countries including the U.S. and the U.K. recognize carryforward deductions for crypto investment losses.

He also pointed to the lack of clarity over how acquisition costs should be calculated. Min said the relevant standards have been left to presidential decree and argued that an unclear system should not leave investors paying more tax than they owe or bearing responsibility for filing errors.

Min said he supports taxation of virtual assets in principle, but argued that the infrastructure for taxation must come first. He said he agrees with the principle that income should be taxed, but that the government must first establish a foundation that allows taxes to be collected fairly.

He said starting taxation before the first exchange of data under the Crypto-Asset Reporting Framework, or CARF, in 2027, without sufficiently securing overseas transaction data, could concentrate the tax burden on users of domestic exchanges. He added that such a move could push trading overseas and reduce revenue for South Korea's domestic virtual-asset businesses, along with related tax receipts.

Min also said the government should disclose in advance the revenue effects and administrative costs of crypto taxation. He said that, just as the U.K. disclosed not only expected tax revenue under CARF but also government implementation costs and the burden on businesses, South Korea should also present the revenue effects, administrative costs and investor reporting burden tied to the timing of implementation.

He also proposed delaying virtual-asset taxation until after passage of the Digital Asset Basic Act, a bill he introduced. The proposal calls for first establishing the legal status of staking, lending, airdrops and hard forks, as well as investor protections and service provider responsibilities, and then starting taxation once overseas transaction data is actually secured. Publicly available legislative materials also confirm that Min introduced the framework bill to institutionalize rules for the broader digital-asset sector.

"This is not about avoiding taxation. It is about collecting it properly," Min wrote, adding that authorities should also strengthen enforcement against unfair trading and investor protection during the preparation period.