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South Korean Officials Proposes Taxing Cryptocurrency Profits

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South Koreans may soon see their cryptocurrency proceeds slashed by the tax man.Earlier this week, South Korean officials in the Ministry of Strategy and Finance proposed taxing profits made through crypto-fiat transactions, including tokens sold by mining firms through ICO offerings. 

The regulator anticipates to submit the complete proposal in July and hand in the tax amendment to the South Korean regular assembly in September, according to a report by a local media outlet by the name Edaily. South Korea has long attempted to settle on a regulatory framework for cryptocurrencies. The proposed amendments could bring much needed clarity in the country’s cryptocurrency industry.

Currently, the South Korean law does not tax the revenue generated from cryptocurrency transactions, unlike the likes of the US, Japan, Germany, and many others who tax profits obtained from cryptocurrency dealings. Moreover, Singapore also exercises a Value added tax (VAT) on digital currency transactions, however, the South Korean officials made it clear they do not intend to go that far.

South Korean officials to tax revenue generated from crypto transactions

The South Korean lawmakers are now looking to invoke the usual ‘taxation where income is located’ rule to cryptocurrency transactions that make a profit. Furthermore, the tax will not apply if the transaction results in a net loss, but will equally tax both South Korean citizens and foreign residents.

Following G20’s recommendations, digital currencies are expected to be classified as assets as opposed to currencies. Nevertheless, not everyone is not okay with the proposed changes and the ability to effectively enforce taxation. According to a researcher at the Korea Local Tax Institute, Young Jeong:

“If you do a P2P transaction without going through an exchange, there is a possibility of avoiding taxation. Even with IP tracking, if there are a large number of targets, administrative costs will increase and it will be difficult to track each day.”

Furthermore, South Korean lawmakers are also suggesting to ban the country’s residents from using decentralized finance (DeFi) products, labeling digital currencies as high-risk assets.

CoinTracker Onboards Six New Partners to Join Coinbase and Turbotax as Platform Crosses 100,000 Users

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Cryptocurrency companies across the globe have begun working by keeping real-world use cases in mind. A survey of the cryptocurrency space showed that users wanted to use crypto applications that would cater to their need for easy access and increased credibility in the industry.

The growth of digital assets was again illustrated when CoinTracker announced that a hundred thousand users had crossed their platforms. The achievement comes two years after the official launch of CoinTracker.

CoinTracker’s progress has been steady since its launch in 2018. Aside from crossing the 100,000 mark, the company has also onboarded six new partners. The new partners were Casa, Cypto.com. ErisX, IDEX, Lollo, and Compound. The founders admitted that their mission of bringing economic stability to the world had come to a halt because of the rampant spread of the Coronavirus.

CoinTracker added that the new partnerships will make cryptocurrency taxes simple with more developments pending in the pipeline. Chandhan Lodha, one of the co-founders of CoinTracker added:

“What we have uniquely seen with cryptocurrency though, is a surge of retail demand for new users trying to buy the dip. Along with this surge in demand has been increased desire from cryptocurrency platforms to have a compliant tax solution for their users, and this is where our partners such as Casa, Coinbase, Compound, Crypto.com, ErisX, IDEX, Lolli, and TurboTax have partnered with us to make cryptocurrency simple.”

According to the founders, the partnerships were mutually beneficial. CoinTracker and Casa will work together to give their users’ access to multi-signature security. The concept of multi-sig is popular in the cryptocurrency industry because of a multitude of advantages, especially in terms of privacy. At the same time, the Crypto.com partnership will enable members to report their crypto holdings for multiple jurisdictions.

ErisX joined hands with CoinTracker to streamline the process of delivering data to tax professionals. The biggest advantage of the partnership was that users no longer needed to send these files over e-mail.

The six new companies will join Coinbase and Turbotax as CoinTracker partners. Statistics from within the organization pointed to 175,000 connected wallets and exchanges with over $20 billion in cryptocurrency transaction volume. CoinTracker’s features also allowed users to claim over $600 million in capital losses on their taxes.

Both the founder opined that Bitcoin provides the foundation for a monetary system “that has the best store of value that has ever been invented”. Chandan and Jon claimed that since Bitcoin does not need any trusted third party to verify transactions, it inherently builds confidence and transparency within the ecosystem. Officials close to the developments believe that as more people understand cryptocurrency taxation, the faith in the industry would increase.

Cryptocurrency regulations have always been shrouded in doubt since the industry’s inception. It is at least heartening to see that mainstream authorities have recognized crypto as an asset worthy of discussion. Just recently, the US Department of Treasury announced that individuals and corporate entities could defer their tax payments for three months without any penalty. This was done so that people could cope with the spread of the coronavirus.

South Korea Pushes For More Cryptocurrency Adoption With New Taxation Laws

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 Cryptocurrency adoption has been on the rise in recent weeks and the countries of South Asia have been at the forefront. Reports have shown that developments in Asia have surpassed that in the US, with proponents betting on China and South Korea.

South Korea’s recently reported that it had taken significant steps to integrate cryptocurrencies into its economic systems after providing amendments to its economic framework. 

The country claimed that it would step up efforts for cryptocurrency taxation after the National Assembly passed a new revision. The amendment will be made to the Reporting and Using Specific Financial Transaction Information Act, with the aim of putting the cryptocurrency industry under government regulation.

Cryptocurrency companies will now be asked to take anti-money laundering measures and conduct their business on the basis of real-name accounts.

South Korea has stated that any exchange that does not comply with the stipulated rules will be banned from operating in that country If the registration is not carried out, the State has the right to sentence owners to up to five years in prison

Apart from jail time, cryptocurrency exchange heads may also be asked to pay 50 million Won or $42,000.  One of the other main agendas of the new revised law is to establish a solid playing ground for cryptocurrency taxation.

All details about the cryptocurrency taxation laws will be released in July. At the same time, the Korea Blockchain Association would survey market participants and deliver their findings to the tax authorities.

The government has also asked the officials heading the cryptocurrency companies to function on real-name accounts. Korea is one of the few countries that has seriously considered cryptocurrency as a legitimate form of transaction and the tax plan is seen as a first measure.

The country’s move towards cryptocurrency taxation stemmed from the Bithumb issue back in December 2019. Last year, the National Tax Service incited a massive controversy by filing an 80 billion won tax on Bithumb.

This led to multiple proponents of the cryptocurrency industry to believe that they were being treated unfairly. Bithumb had retaliated to the ban by stating that there were no legal provisions for crypto to be taxed in the country.

A member of the Korea Blockchain Association said that they will be holding a series of debates on cryptocurrency soon and that there will be input from multiple sectors of the decentralized industry. At the moment, there were only four exchanges that adhered to the rules proposed by the Blockchain Association. They were Upbit, Bithumb, Coinone, and Korbit.

US Congress Discusses Crypto Taxes and Benefits for Small Businesses

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The United States government has been active in monitoring developments in the cryptocurrency industry and ensuring they adhere to written law. Government agencies have also taken steps to listen to, and devise strategies for, the digital asset space

During a recent US congressional meeting, one of the testifying witnesses claimed that the US cryptocurrency taxation expectations were mired in complexities.

The meeting was titled “Building Blocks of Change: The Benefits of Blockchain Technology for Small Businesses and included parties that defended as well as attacked blockchain technology. The focus was on small businesses because regulators believed that blockchain technology could really help them build from the ground up.

Officials like Marvin Ammori, who serves as a member of the General Council of Protocol Labs, have added that cryptocurrency taxes are the worst nightmare, in response to a question as to whether crypto is ready for mass adoption. Compared to discussions on launches, such as Facebook’s Libra, the Small Business Committee took a new look at distributed ledger technology.

Congress aimed to have a healthy conversation about how blockchain can help emerging businesses grow, rather than just applying it for cryptocurrencies. Mr. Marvin Ammori also pointed out the difficulties that may arise when cryptocurrencies like Bitcoin are used. He said:

“If you wanted to spend Bitcoin on a coffee this morning, you’d have to keep track of what you paid for the Bitcoin and how much it was worth the moment you spent it, and pay the capital gain or loss on every single transaction. If we could have a de minimis tax exemption, which has been proposed — the Virtual Currency Tax Fairness Act — I think all of you should support that.”

The confusion caused by the decisions of the Securities and Exchange Commission [SEC] and the CFTC was also discussed in US Congress. The need for clarity among regulators has been a major marker in the industry, as a number of inane laws have brought down critical cryptocurrency projects. Some cryptocurrency enthusiasts even say that the SEC directives do not allow the creation of a Bitcoin ETF.

This was the first time in a long time that the US Congress actually made some valuable points rather than just making a mockery of the industry. The cryptocurrency space has been the subject of ridicule several times earlier with people who have no idea about the technology partaking in it. Meetings such as the Building Blocks of Change act as stepping stones in improving the talk around crypto.

The most recent meeting was a follow-up to another meeting held on 3 March. During the earlier discussion, four digital asset space experts spoke about their recent leaps and opportunities. The panel also included Jesse Sprio, Chainalysis ‘ Global Head of Policy and Regulatory Affairs.