The latest development signifies a change in the Democratic Party’s (KDP) stance, moving away from its previous support for the cryptocurrency capital gains tax to take effect in 2025. During a press conference held on December 1, 2024, KDP officials announced an agreement with the ruling People’s Power Party (PPP) and the government to introduce a two-year moratorium on the tax. The initial plan was for the law to come into force in January 2025, but this new agreement extends the timeline.

The PPP initially proposed a three-year grace period until 2028 to delay implementation and support growth in the cryptocurrency sector. The government had suggested a two-year deferral, aligning with the KDP’s decision.

The debate surrounding the taxation of cryptocurrency gains in South Korea has been complex. The PPP argued that an early tax could deter investors from the domestic market and that a longer delay would be beneficial for growth. Their proposal to defer until 2028 was part of their election promises.

Until recently, the KDP opposed deferral plans. In November, they criticized the PPP’s tax delay plan, labeling it a political maneuver aimed at gaining leverage in future elections. At that time, the KDP maintained its commitment to implementing the tax in 2025, suggesting instead an increase in the taxable threshold from USD 1,800 to USD 36,000 to target only significant investors.

A history of prolonged delays

South Korea initially aimed to impose a 20% tax on cryptocurrency trading profits starting in 2021. However, industry backlash and concerns over investor impact led to repeated postponements. The implementation was first delayed to 2023, then further extended to 2025 and now postponed again until 2027.

The delay allows South Korea more time to address these concerns and prepare for the eventual rollout of the tax. For now, this extension provides additional breathing room for both stakeholders and regulators.