[Reporter’s Notebook] Cryptocurrency Taxation... Keep Political Logic Out

Even in the National Assembly, where conflicts occur almost daily, there is a zone of peace. That is the issue of cryptocurrency taxation. Currently, members of the National Assembly from both ruling and opposition parties are advocating for the postponement of cryptocurrency taxation. As if competing, lawmakers have proposed bills to delay cryptocurrency taxation. They are raising their voices, promising to ensure the bills are passed within the regular session.

Postponing taxation essentially means the state is recognizing tax exemption, which is an enormous benefit. Benefits exclusively for cryptocurrency have been ongoing for a long time. Since the United States has been taxing cryptocurrencies since 2014, Korea has effectively provided benefits to cryptocurrency investors for seven years.

Now, as lawmakers extend the benefit period, they must prove the social value of protecting the cryptocurrency market. The problem is that while they emphasize the potential of cryptocurrencies as currency substitutes, it is difficult to agree. All investors purchasing cryptocurrencies aim to make cash profits. Only Bitcoin still plays a role as an asset. However, even this is for the purpose of making money. On the contrary, there are concerns that cryptocurrencies may be harming social value. Multi-level marketing scams mediated by cryptocurrencies are rampant. Many investors suffer daily from the extreme volatility.

Although cryptocurrencies are said to be connected to future growth industries like the metaverse, in reality, they are largely unrelated. Cryptocurrencies are rewards given each time a calculation is solved on a blockchain designed for security purposes and are unrelated to virtual spaces. Since both concepts include the word "virtual," it can only be seen as a simple connection. Blockchain technology is also not widely applied in reality.

The social value of postponing cryptocurrency taxation is minimal, while it negatively affects the tax system. The fundamental principle of taxation is "taxes exist where income exists." This has nothing to do with what assets are recognized or investor protection. Capital gains tax of about 10-20% is imposed on unlisted stocks, which have no separate protection measures. If unlisted stocks are taxed but cryptocurrencies are excluded from taxation, tax equity collapses.

The lawmakers' argument to postpone cryptocurrency taxation is nothing but populism. Political logic is dominating the cryptocurrency market ahead of the presidential election. What is needed now is legislation to protect cryptocurrency investors, not tax postponement. While cryptocurrency investments are encouraged, and exchanges and scammers who "eat and run" increase, there is no clear legal basis to punish them. If we truly care about this industry and citizens, it is time to establish cryptocurrency regulations. If such populism arises, it would be welcomed with open arms.