Trade and store crypto
Can I trade Bitcoin and cryptocurrency in South Korea?
South Korea has excellent scores in selected categories, with an above-average number of crypto exchanges and blockchain organizations. ICOs are prevalent with a high proportion related to environmentally-related projects. There is a lax tax approach to digital assets in South Korea with a more cohesive crypto tax now pushed forward to next year – or later. Uncertainty within the region, especially since the Ukraine War/Invasion/Military Exercise and the collapse of FTX, may have some effect on crypto investment and regulation going forward. Not to mention the ongoing controversy that follows a country with a higher-than-average number of reported fraud cases.
Going forward, the collapse of FTX has made South Korea, like many countries, sit up and reassess its regulatory framework for the crypto economy. South Korea is happy to follow some sort of lead from what is emerging from the US on these matters, especially in light of American President, Joe Biden’s executive order on digital assets. South Korea has a healthy 51 million people who are keen on crypto and this looks likely to continue. That said, South Korean regulation comprises an amendment to The Act on Reporting and Use of Certain Financial Transaction Information. In South Korea crypto exchanges need to acquire an information security certificate to curtail the growth of falsely named accounts, money laundering, and other nefarious crimes.
Bitcoin and cryptocurrency trading in South Korea
Recent new regulations and laws have changed everything in South Korea for the moment. Where to spend your bitcoin is not really the issue when so many exchanges have ceased trading.
South Korea is home to an active crypto economy even though cryptocurrency is not regarded as legal money. The market grew fantastically when Bitcoin first hit the heights and has had a big resurgence since prices began pricing again. In the meantime, crypto exchanges have been subject to increasingly firmer regulation and guidance. All exchanges operating in South Korea must obtain licenses from financial and Internet regulators – a requirement instigated in 2021 – as a result, far fewer exchanges are now able to operate. Receiving certification from the Korea Internet and Security Agency (KISA) is the first step to obtaining final approval from the Financial Services Commission (FSC). As we have seen in other countries, having a clearer regulatory framework actually opens up the crypto economy for exchanges and service providers and offers greater security for investors. On the other side of the coin, having licenses granted to only those services, which can comply, is being seen as reducing the choices available.
Bitcoin taxes on Bitcoin trading in South Korea
As often with cryptocurrency much depends upon how a country defines it in order to see which way to tax it. In South Korea, cryptocurrency transactions are viewed neither as cash nor financial assets and have not been subject to specific tax law – but this will be changing very soon, however, with The Ministry of Strategy and Finance pushing for a tax policy on crypto transactions profits.
From 2022 taxes were to be imposed on gains from the sale of virtual assets. These taxes were to be separate from other taxable income and amount to 22% of income gained over KRW 2.5 million ($1,900) in a one-year period. However, at present South Korea is postponing this proposed tax until 2025. Source: https://www.coindesk.com/policy/2022/07/21/south-korea-postpones-20-crypto-tax-to-2025/.
South Korean Bitcoin mining regulations
Mining is legal in South Korea but as we all now know, it requires vast amounts of energy and huge computing power. In many countries the cost is prohibitive but when Bitcoin prices rise so too does mining activity generally. In South Korea, following strict new regulatory clampdowns and licensing requirements, any business that looks to mine virtual assets and then sells them for flat currency will be classified as a Virtual Asset Service provider (VASP). This means it has to conform to the required reporting obligations as a VASP and be subject to taxes as they apply.
Investing in cryptocurrency in South Korea
South Korea’s four largest banks are now positioned to offer custodial services in the buying and selling of cryptocurrency – through approved partner exchanges – so it would seem investment in crypto for the long term is viable for individuals. Pensions funds, such as the Korean teachers’ Credit Union is interested in gaining exposure to Bitcoin through exchange-traded funds and is consulting with leading asset managers.
South Korea’s financial outlook on Bitcoin and the crypto economy
South Korea is researching the practicalities of launching a central bank digital currency (CBDC) and is trialing studies under test conditions. It marks a big first step for the country and could be seen as the first step to integrate a form of digital ledger currency within the existing financial system as cash becomes less and less relevant. Within the banking sector generally, a number of South Korea’s largest institutions including the Woori Financial Group and KB Kookmin have announced their intention to provide crypto custodial services to customers. These services will allow clients to engage in crypto purchases and meet the new regulations regarding cryptocurrency transacting.
South Korea and Defi
South Korea is highly committed to the potential that blockchain technology holds and the government is actively supporting research and development into several blockchain projects. Government bodies include the Ministry of Science and the National IT Promotions Agency and the areas of assessment include digital ledger-based currency, healthcare, and real estate. Like most countries, the central bank is also trialing a research project into digital currency. That said, full-on decentralized finance as a future next step to integrate within the current financial system is not on the cards.