'Dodged the worst' — industry urges digital asset framework law amid tax deferral hopes

The government's review of a further delay to digital asset taxation — scheduled to take effect in January — has brought a measure of relief to the industry, though caution persists as the deferral has yet to be confirmed and calls grow louder for a basic digital asset law to accompany any overhaul of the tax regime.

Domestic won-denominated exchanges have reacted positively to reports that Cheong Wa Dae is considering an additional postponement, industry sources said Monday. Concern had been mounting that launching the regime in January — before adequate taxation criteria and supporting infrastructure are in place — would trigger capital flight to overseas exchanges and widespread investor confusion.

Average daily trading volume in the domestic virtual asset market plunged 57.5 percent, from 7.3 trillion won ($5.51 billion) in the second half of 2024 to 3.1 trillion won in the first half of 2026.

Digital asset taxation was introduced through an amendment to the income tax act in 2020 but has been delayed three times since. Under current law, gains exceeding 2.5 million won a year from the transfer or lending of digital assets are to be taxed at 22 percent starting in January. A further deferral would mark the fourth postponement.

Exchanges say a confirmed delay would give them the preparation time they need to implement the system. Taxation criteria covering acquisition costs and different transaction types have yet to be clearly defined, they say, making it difficult to build the necessary tax-processing systems.

"In a situation where we are already stretched just developing the tax infrastructure, having more preparation time is welcome," an official at one exchange said. "Once the taxation calculation criteria are established, exchanges will be able to accelerate development of the relevant systems."

"If the deferral mood becomes more certain, I think we can say we've dodged the worst," the official added. "If discussions on the taxation method and rates can take place during the deferral period, it could reduce the incentive for investors to move to overseas markets."

An official at another exchange said additional issues — including cost-basis calculation, loss carryforward deductions and the linking of domestic and overseas transaction data — still require further discussion, fueling industry hopes for a postponement. "We also hope that discussions on the digital asset basic law will continue in parallel with the tax debate," the official said.

Some in the industry are urging caution, noting that the outcome remains to be seen until a deferral is formally confirmed. While Cheong Wa Dae has indicated it is reviewing a postponement, actually pushing back the implementation date requires the National Assembly to pass an amendment to the income tax act.

"The deferral has not been confirmed yet, so it is hard to say we have cleared the hurdle or moved on to the next stage with peace of mind," one industry official said. "Watching until the bill passes the legislature is the priority."

Academics argue that the digital asset basic law should first clearly define the relevant assets and transaction types before the tax regime is introduced. The current income tax act designates income from the transfer and lending of digital assets as taxable, but the emergence of new transaction types has widened uncertainty over the scope of taxation.

"The principle that income should be taxed where it arises is correct, but implementing taxation before even a basic digital asset law has been enacted could create equity problems," said Hwang Seok-jin, a professor at Dongguk University's Graduate School of International Information Security. "In the past, the tax framework was designed around transfers and lending, but now there are diverse income-generating methods such as staking, decentralized finance and airdrops."

"It would be desirable to first clearly establish the relevant concepts through a digital asset basic law and then introduce taxation," Hwang added, stressing that the introduction of loss carryforward deductions and an expansion of the annual basic deduction from 2.5 million won should also be discussed together.

Despite the growing calls for a basic law, legislative progress has been slow. The Financial Services Commission announced in a presidential briefing in July that it planned to draft a bill by year-end, but has yet to submit even a government proposal to the National Assembly. FSC Chairman Lee Eok-won told the National Assembly's Political Affairs Committee audit on Thursday that consultations on the digital asset-related bill were in the final stages and pledged to move discussions forward as quickly as possible.

Democratic Party of Korea lawmaker Min Byeong-deok had earlier pushed to hold a public hearing on the digital asset basic law in September, saying he expected full-scale bill deliberations to begin around November once the national audit concluded. A National Assembly official said no schedule had been confirmed but that efforts were ongoing to hold the hearing around the audit period.

Meanwhile, the National Tax Service had previously announced it would publish digital asset taxation guidelines in November. Some in the industry believe the guidelines could still be released on schedule regardless of whether the tax is deferred. "Even if the government has leaned toward a deferral, nothing has been confirmed by the National Assembly, so the guidelines should come out as planned," one industry expert said, adding that the NTS was understood to have completed much of the relevant preparation.