South Korea's Ruling Party Proposes Fourth Delay of Crypto Tax

South Korea's ruling Democratic Party has formally proposed deferring the country's crypto income tax, currently scheduled to take effect on Jan. 1, 2027. If approved, the delay would mark the fourth postponement of a levy that lawmakers first legislated in 2020.

Party leader Kim Min-seok announced the proposal at a party supreme council meeting at the National Assembly, local outlet News1 reported on Wednesday. He said the decision followed consultations through the Strategy and Finance Committee, government-party talks, and meetings with crypto asset businesses.

Kim told the council that party members agreed South Korea should first enact the Digital Asset Basic Act, a comprehensive legal framework for crypto, and give companies and investors time to adapt to the new rules. "This time the party would set a clear deferral period while thoroughly preparing prerequisites," he said, according to the report, pointing to the use of overseas transaction information, IT system verification and taxpayer guidance as the conditions that must be in place before enforcement begins.

What does the tax currently impose?

Under the existing plan, the levy would apply a 22% tax, including local tax, to annual gains from the transfer or lending of crypto assets above a basic deduction of 2.5 million won — roughly $1,868. That structure mirrors the treatment of financial investment income in South Korea, though crypto has never reached the point of actual collection because of successive deferrals.

The deduction threshold gives the measure a practical frame: an investor realizing gains above about 1.87 thousand dollars per year would enter the tax net once the levy activates. For exchanges and other crypto asset businesses operating in Korea, the recurring delays have prolonged regulatory ambiguity around reporting, withholding and compliance obligations.

Why now?

The proposal signals a shift in sequencing rather than abandonment. Kim explicitly acknowledged the past deferrals and framed this round as different: the party intends to define a fixed deferral period and complete the technical and administrative groundwork before the tax goes live. That framing addresses a longstanding criticism that earlier postponements lacked a clear endpoint.

It also aligns with movement elsewhere in government. Last week, reports indicated that South Korea's presidential office was discussing postponement of the levy until 2029, to align with the U.S. timeline for joining the OECD's Crypto-Asset Reporting Framework — the cross-border information-sharing standard that would give Korean tax authorities visibility into overseas holdings.

What does this change for market participants?

For Korean investors, the practical effect is continued exemption from capital gains taxation on crypto beyond the current 2027 start date, pending legislative approval. For exchanges and institutional players, the priority shifts to the Digital Asset Basic Act as the primary legislative vehicle, meaning compliance planning should track that bill's progress rather than the tax calendar alone.

The immediate watchpoint is parliamentary action on both measures: the deferral requires passage, and the Digital Asset Basic Act has yet to be enacted.