South Korea’s main opposition Democratic Party of Korea (DPK) agreed on Sunday to postpone the implementation of a controversial cryptocurrency tax by two years, responding to mounting investor backlash and political pressure.
The decision mirrors the party’s move a month earlier to scrap a planned financial investment income tax, also due to investor concerns. The DPK’s reversal signifies a notable shift in its approach to taxation policies affecting the nation’s growing investment community.
Starting next year, the government had planned to impose a 22% tax—including local taxes—on annual income exceeding 2.5 million won ($1,790) from virtual asset investments.
The policy, aimed at regulating the rapidly expanding cryptocurrency market, had already been postponed twice. Initially, the DPK intended to proceed with the taxation plan by raising the tax exemption threshold to 50 million won.
However, increasing resistance from a burgeoning number of cryptocurrency investors and opposition from the ruling People Power Party (PPP) led to the decision to defer the tax implementation.
The PPP had advocated for abolishing the tax law altogether, arguing that supporting young people in building their assets was more critical in the current economic climate.
The PPP welcomed the DPK’s decision, characterizing it as a positive outcome for young investors. The party emphasized that policies should align with the public’s will, especially when fostering financial growth among the younger population.
This marks the second instance where the DPK has reversed its stance on taxation following public opposition. On November 4, the party scrapped plans to introduce a financial investment income tax, citing challenging conditions in the domestic stock market.
That tax was intended to levy a 22% charge on capital gains exceeding 50 million won from stock investments starting in 2025.
The amendment to the Income Tax Act, which includes the deferment of virtual asset taxation and the abolishment of the financial investment income tax, is scheduled for approval at the National Assembly’s plenary session on Monday.
The repeated postponements reflect the government’s cautious approach amid volatile financial markets and the rising influence of retail investors.
South Korea has seen a surge in cryptocurrency trading, particularly among younger investors seeking higher returns amid a sluggish job market and soaring real estate prices.
Analysts suggest that the government’s policy reversals may be influenced by upcoming elections and the desire to maintain favor with younger voters active in the cryptocurrency market.
The DPK’s decisions highlight the challenges policymakers face in balancing regulatory measures with the interests of a significant voter base.
The PPP’s stance underscores the political significance of the issue. By advocating for the abolition of the crypto tax, the ruling party positions itself as a supporter of young investors, potentially strengthening its appeal among this demographic.