South Korea’s Crypto Tax System Needs Overhaul, Report Says

On Nov. 5, South Korea’s National Assembly Research Service said the country’s crypto tax system needs broader institutional changes before the levy takes effect. The finding came in “Should Digital Asset Taxation Be Implemented as Is?”, a report that reviewed the tax treatment of gains, gifts and transaction data.

The report starts with classification. Current law classifies gains from transferring and lending virtual assets as other income. The service said that category misses the economic nature of the income and can weaken tax fairness. It also argued that trading gains resemble capital gains because they come from increases in asset value.

That difference matters when two similar investment returns receive different rules. Direct sales of virtual assets fall under other-income tax, while sales of overseas-listed spot crypto ETFs follow capital-gains rules for foreign stocks.

Family gifts and accrued gains

The report also identified a family-gift route around tax on accrued gains. Virtual assets do not fall under the capital-gains regime’s carryover taxation rules. An investor could gift appreciated assets to a spouse or a lineal ascendant or descendant, then sell them. The service said that structure could reduce tax on gains accumulated before the gift.

Family transfers therefore do more than move ownership. They can change the taxable result without a comparable market transaction.

Rules trail new transaction types

Tax law also lags behind the ways people now obtain and use digital assets. The service found too little guidance on when assets obtained through mining, staking, airdrops, hard forks and decentralized finance should enter taxable income. It called for rules that identify both taxable items and the timing of income generation.

The agency said there is room for tax gaps across family gifts, overseas spot virtual-asset ETFs, and assets earned through mining, staking and DeFi. For service providers, that uncertainty complicates recordkeeping and tax-control design.

Exchange systems remain in different stages

Materials presented at a National Assembly policy forum on Oct. 30 showed an uneven buildout of exchange tax-reporting systems.

• Upbit is preparing to introduce a system.
• Bithumb plans to begin development after detailed standards are finalized.
• Coinone has put related work on hold until the tax law settles.

Those different timelines leave investors who use multiple exchanges with a practical burden: they may have to verify acquisition costs and transaction records themselves.

Overseas data creates a collection gap

Overseas data remains the harder problem. Foreign exchanges and decentralized exchanges, or DEXs, remain harder for tax authorities to monitor adequately than domestic operators.

The report pointed to the Organization for Economic Cooperation and Development’s Crypto-Asset Reporting Framework, known as CARF. If the framework is introduced in 2027, major countries are set to participate at different times in 2028 and 2029. That staggered schedule leaves a gap in information collection even if the framework starts on time.

The report treats that gap as a reason to build data access before taxation begins.

What does this change for investors and exchanges?

For investors, it points toward clearer rules for when income arises and more consistent treatment of direct crypto sales and overseas spot ETFs. For exchanges, it turns tax reporting into core infrastructure that must be built alongside the law, not after it.

The service stressed that “virtual-asset taxation should be implemented only after exchange tax systems and a framework for securing overseas transaction data are put in place.” It also called for revisions to income classification and tax principles by transaction type, along with systems that equip service providers to meet their reporting duties.

The report does not amend current law. Its sequence is clear: fix classification and transaction rules, build reporting and overseas-data access, then implement the levy. That sequence matters because repeated delays could damage policy credibility.

If CARF is introduced in 2027 and major-country participation remains staggered across 2028 and 2029, South Korea’s levy timetable remains exposed to further delay unless the reporting and data gaps close first.