Bitcoin and crypto trading in South Korea
Total Population – 51.3m
Number of crypto owners – 1.9m
Percentage of the population owning Crypto – 3.79%
Residents crypto interest country rank – 7
Spend 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.
Law and crypto trading in South Korea
South Korea is home to an active cryptoeconomy 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 a far fewer number of 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 cryptoeconomy for exchanges and service providers and offers greater security for investors. On the other side of the coin, having licences granted to only those services, which can comply, is being seen as reducing the choices available.
Paying tax on my crypto trading in the 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 transaction profits.
Tax relief, changing residency and gifting crypto coins South Korea
From 2022 taxes are to be imposed on gains from the sale of virtual assets – these taxes may be separate to other taxable income and look to total 22% of income gained.
South Korea crypto 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 sell them on 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 which apply.
Planning your retirement and 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 services’ outlook on Bitcoin and 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 steps 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: the latest developments
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 (DeFi) as a future next step to integrate within the current financial system is not on the cards.
Crypto security, transparency and compliance in South Korea
Cryptocurrency trading and services are rigorously regulated and the use of anonymous accounts banned. The Financial Services Commission (FSC) also supervises new and very tight reporting requirements for banks and crypto exchange accounts. Cryptocurrency trading in South Korea requires that any individual must have a ‘real-name’ account (in the same bank as used by a crypto exchange) in order to deposit or withdraw funds from their e-wallet. Standard Anti Money Laundering rules and structured transaction reporting requirements apply to both banks and exchanges in order to verify an investor’s identity. Crypto service providers must comply with Know Your Customer standards and be registered with financial regulators.