The government of South Korea is considering a revision of a law which offers considerable tax benefits to cryptocurrency exchanges.
A statement by the Korean government quoted in Coindesk today states that “cryptocurrency transaction brokerage is not effective in generating added value.”
The current tax structure in Korea allows for small and medium-sized enterprises (SMEs) and startups to apply for 50 to 100 percent deductions of income and corporate taxes during a company’s first five years. This can be followed by deductions of as much as 30 percent in the years following.
Korean cryptocurrency exchanges have been a black mark on the Korean economy over the last several months. In 2018 alone, an estimated $100 million has been stolen in Korean exchange hacks, and Korean lawmakers have been calling for an immediate need for legislation.
“While crypto markets have seen rapid growth, such trading platforms don’t seem to be well-enough prepared in terms of security,” said Hong Seong-ki, head of the virtual currency response team at South Korea’s Financial Services Commission in a recent interview. “We’re trying to legislate the most urgent and important things first, aiming for money-laundering prevention and investor protection. The bill should be passed as soon as possible.”
The potentially growing security concerns of exchanges, which Bloomberg calls “rife with security flaws and money-laundering risks,” is likely serving as further motivation for a proposed revision in Korean tax law.
A draft of the revised bill is set to be submitted to the Korean National Assembly by August 31st. This will be followed by parliamentary debate and a vote on whether or not the bill should be put into effect.
While cryptocurrency exchanges face tax revisions and potentially strict regulation, supporters of the revised tax laws have made it clear that the proposed policy changes will not apply to blockchain startups working on researching and developing new technologies. Indeed, the Korean government, along with many of the country’s leading tech companies, has expressed continued support for blockchain technology and has invested hundreds of millions of dollars into blockchain research.
A leading tech association recently predicted that due to blockchain’s security, ease of use, multi-system data consolidation, and end-to-end visibility, that blockchain will grow to be a $176 billion industry by 2025 and more than $3 trillion by 2030.
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