11 Dec
11Dec

The South Korean cryptocurrency sector has suffered a significant setback following the declaration of martial law in early December. The National Assembly has been forced to postpone all crypto-related legislative work, including the highly anticipated crypto tax, until at least mid-2025.

Crypto Tax Delayed, Market Uncertainty Reigns

One of the most immediate consequences of this delay is the postponement of a new tax on crypto profits. This tax, originally scheduled to take effect in January 2025, would have imposed a 22% tax on profits exceeding ₩2.5 million (approximately $1,750).

The declaration of martial law effectively halted the implementation of this tax, providing a temporary reprieve for crypto investors. However, this unexpected turn of events also sent shockwaves through the market. Bitcoin prices on Upbit, South Korea's largest cryptocurrency exchange, plummeted by 30% within 30 minutes following the martial law announcement.

Key Crypto Legislation Frozen

Beyond the tax delay, the declaration of martial law has brought all major crypto-related legislative work to a standstill. This includes crucial issues such as:

  • ICO Ban Review: The review of the existing ban on Initial Coin Offerings (ICOs).
  • Corporate Crypto Investments: Determining whether companies can invest in cryptocurrencies for their balance sheets.
  • Crypto-Based Securities Regulations: Establishing clear guidelines for crypto-based securities.

This legislative freeze creates significant uncertainty for the South Korean crypto industry, potentially driving away businesses and investments to countries with more defined regulatory frameworks.

Concerns for the Future

Many crypto businesses and industry experts are expressing concerns about the prolonged uncertainty surrounding crypto regulations in South Korea. With other global powers like the United States making strides in developing comprehensive crypto policies, South Korea risks falling behind and losing its competitive edge in the rapidly evolving crypto landscape.

Limited Progress Amidst Uncertainty

While the National Assembly has halted most crypto-related legislation, the Financial Services Commission (FSC) has managed to introduce some basic rules for corporate crypto accounts. However, these limited measures fall short of addressing the broader concerns of the industry, particularly regarding ICOs, STOs, and corporate crypto investments.

Experts Warn of Missed Opportunities

Kim Gap-rae of the Capital Market Research Institute warns that the current legislative standstill could result in significant missed opportunities for South Korea in the burgeoning crypto sector. As other countries embrace and regulate cryptocurrencies, South Korea risks losing its position as a key player in this rapidly evolving space.

December 2024, Cryptoniteuae

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