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- Revenue of cryptocurrency exchanges might take a hit as investors agitate over tax complications
- South Korean investors are majorly youth who like higher returns within a short period of time
- Higher taxes on capital gains will have serious repercussion on digital currency investment strategy
It seems every country is planning to impose some form of regulation over cryptocurrency transactions and the nature in which digital assets function. South Korea is already in that list but this time with a new policy. The Financial Service Commission has planned to impose a tax of 20% on cryptocurrency transactions that will be classified as miscellaneous income. However, objections were raised from a group of experts who felt that the move was a hasty one.
Virtual asset to be recognized as a category
Several countries have identified cryptocurrency as a means of payment, while some consider it to be a property and S. Korea categorizes it as a virtual asset. Cryptocurrency exchanges face an existential crisis with the recent government clampdown which requires them to associate with local banks. It empowers the domestic financial system but puts the local banks at a risk. Any illegal activities carried out via cryptocurrency will have to be borne by the bank itself.
The local association with banks will help customers have a real name bank account. With more than 200 cryptocurrency exchanges in the country, the top 4 have agreed to comply with the regulations. Bithumb, Korbit, Coinone and Upbit dominate the world’s most dense market for digital currencies. Although the exchanges are aplenty, it is still a highly unregulated market for the youth.
Cryptocurrency devoid of intrinsic value
South Korea has a huge population for cryptocurrency where its daily turnover has tripled than that of stock trading. The premium for Bitcoin in the country rose more than 20% as the youth were very enthusiastic about investing in it. The Bank of Korea governor, Lee Juyeol, had stated that it is difficult to find out the intrinsic value of digital currencies.
Illegal activities have risen with more intermediaries involved in the process. It is just for the government to impose heavy taxes on capital gains over and above Won 2.5m ($2,200). Investors can benefit from risky investments if prices change in suitable directions. However, investors need to find value in what they invest their hard earned money in.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
