South Korea advances cryptocurrency bill, 22% tax rate approaches

The Financial Commission of Korea plans to formulate a comprehensive basic law on digital assets

The Financial Commission of Korea told the National Assembly before the policy briefing on July 29 that it plans to work with the ruling Common Democratic Party to formulate a comprehensive Basic Law on Digital Assets. Currently, there are 10 bills related to digital assets and stablecoins pending review in Congress, and the government is expected to consolidate them into a ruling party proposal within this year.

Ten pending bills are expected to be consolidated into government proposals

Despite opposition parties 'proposal to repeal the bill and petition, the 22% cryptocurrency tax is still scheduled to be implemented in January 2027. Before South Korea taxes eligible digital asset income, it can enjoy a tax exemption of 2.5 million won per year. The proposed regulatory framework will cover aspects such as stablecoins, exchanges, information disclosure, internal controls and system resilience.

At the same time, the Congressional Fiscal and Economic Planning Committee originally planned to submit an opposition amendment before the January 1, 2027 effective date, requiring the abolition of the crypto income tax. Neither proposal changes existing laws.

stablecoins and exchange rules will be unified

The proposed law by the Financial Committee will establish rules for the issuance and circulation of stablecoins, clarify the definition of digital asset companies and regulate their behavior. In addition, the law will also set exchange access standards, information disclosure requirements, and controls aimed at protecting users and maintaining reliable trading systems. There are currently 10 digital asset and stablecoin bills pending in Congress, and the Finance Committee plans to coordinate a single government-ruling party proposal as the main text of the negotiations. Li Yiyuan, chairman of the Financial Committee, previously told the government that digital asset legislation should be completed within 2026, including stricter anti-money laundering regulations for stablecoins.

The move is part of South Korea's ongoing efforts to build a comprehensive digital asset regulatory framework. The current "Virtual Asset User Protection Law" mainly involves custody, unfair transactions and user protection. The proposed second phase of the law will regulate issuers, service providers and market structures more broadly.

Issuer ownership and exchange restrictions remain unresolved

The Finance Committee has not yet completed the wording of the bill and has not announced a filing date. A core controversy is whether a South Korean-backed stablecoin issuer must be controlled by a bank-led consortium that holds at least 50% plus one share. Regulators have repeatedly stated that issuer ownership rules have not yet been finalized.

The Bank of Korea supports banks in playing a leading role and believes that stablecoins may affect monetary and financial stability. Industry participants and some lawmakers support allowing issuance by qualified non-bank institutions under licensing and reserve requirements. Lawmakers must also decide whether to impose ownership caps on major exchanges. The Financial Commission's Virtual Assets Committee discussed issues such as bank-led issuance, decentralization of ownership, internal exchange controls, computer security standards and no-fault compensation in March, but regulators have not yet determined these terms.

The opposition party promotes the abolition of the 22% crypto tax

National Power Party MP Song Yan-suk submitted Bill No. 2217609 on March 19, which intends to delete the provisions of the Income Tax Law on income from the transfer or loan of digital assets. Opposition parties believe it is unfair to tax ordinary crypto investors while most stock retail earnings remain tax-free. According to current laws, starting from January 1, 2027, annual encryption revenue exceeding 2.5 million won will face a 20% national tax and a 2% local income tax. The tax has been postponed three times since it was originally scheduled to take effect in 2022.

The government and the ruling party support the implementation of the tax. Tax officials said the IRS is preparing guidelines and has established a dedicated digital assets department. An additional repeal petition supported by more than 50,000 people is also pending before the committee.

Follow-up progress on the two proposals

The Finance Committee must complete consultations with the ruling party and other departments before submitting the comprehensive bill. The 10 existing proposals will be reviewed together with the new text, among which unresolved stablecoin ownership and exchange shareholding rules are likely to affect the direction of negotiations. Amendments to abolish the tax are expected to be submitted to the Fiscal and Economic Planning Commission's Taxation Subcommittee, and public petitions will be submitted to a separate petition subcommittee. When the July 29 meeting was announced, neither of the two subcommittees had been fully formed and there was no review date. Unless lawmakers approve a repeal or another postponement, the 22% tax will take effect on January 1, 2027. There are currently no verified price fluctuations in the crypto market that are directly related to these two legislative developments.