South Korea Assembly Panel Reviews Petition to Scrap Crypto Tax, Warns Reversal Could Hurt Policy Credibility

South Korea’s National Assembly Strategy and Finance Committee, reviewing a public petition to abolish taxation on virtual assets due to take effect in January, said reversing course again could undermine the credibility of tax policy.

A review report on the petition, released on October 21, said the committee examined the issue in terms of tax fairness, investor protection and market impact. The petition was referred to parliament in May after receiving 50,910 signatures. Petitioners argued that it is unreasonable to tax only virtual-asset income after the financial investment income tax was scrapped, and called for the system to be abolished.

The report highlighted that the virtual-asset tax has already been postponed three times. Scrapping a tax regime originally set for introduction in 2022 could weaken the consistency of earlier legislative decisions, it said. Reversing a tax policy finalized through discussions including the National Assembly’s tax subcommittee could also erode confidence in policy and create instability in the crypto market.

Still, the committee found some merit in investors’ concerns over tax fairness. General capital gains on domestically listed shares are typically exempt from tax, while income from virtual assets would be taxed after an annual basic deduction of 2.5 million won. Even so, the report said it may not be appropriate to assess virtual-asset taxation as directly linked to the abolished financial investment income tax. It added that whether the crypto market should receive the same policy support as the stock market requires separate discussion.

The committee also reviewed concerns about the potential impact on market activity and on younger investors’ ability to build assets. Data from the Korea Financial Intelligence Unit showed the domestic virtual-asset market’s capitalization totaled 87.2 trillion won in the second half of last year, down 21.1% from a year earlier. The report acknowledged that implementing the tax could weigh on investor sentiment and burden younger investors seeking to build wealth. But it said further judgment is needed to determine whether that justifies abolishing the tax itself.

On loss carryforwards, the report stressed that the policy rationale for the financial investment income tax differed from that for virtual-asset taxation. Under the virtual-asset tax regime, only gains and losses generated within the same year can be netted out, meaning losses from previous years cannot be deducted from profits in later years. By contrast, the now-abolished financial investment income tax allowed loss carryforwards for up to five years to foster risk capital. The report said that system was not adopted for virtual assets because of concerns over encouraging speculative trading.

The government told parliament it is strengthening the information-gathering systems needed to enforce the tax. The Ministry of Economy and Finance plans to launch an integrated analysis system for virtual-asset transaction data by the end of this year. Starting in 2027, it also plans to obtain overseas transaction data through the Crypto-Asset Reporting Framework, or CARF. On that basis, the government said taxation of domestic and overseas virtual-asset transactions can proceed as scheduled.

Separate bills are pending in the National Assembly, including one from lawmaker Song Eon-seok that would abolish the virtual-asset tax and others from lawmakers Jeong Seong-guk, Kim Sang-hoon and Park Min-gyu that seek to delay implementation. The committee is set to address issues related to virtual-asset taxation during a comprehensive parliamentary audit of the Ministry of Economy and Finance and the National Tax Service on October 22.