South Korea's cryptocurrency landscape faces a potential regulatory shift as the opposition People Power Party has introduced legislation to repeal the country's planned digital asset taxation framework. Floor leader Song Eon-seok submitted a partial amendment to the Income Tax Act on March 19, 2026, aiming to eliminate all provisions targeting cryptocurrency gains.
The proposed tax, which has been delayed three times, is currently scheduled to take effect on January 1, 2027. It would impose a 20% national tax plus a 2% local tax—totaling 22%—on annual cryptocurrency gains exceeding 2.5 million won (approximately $1,700 to $1,900). This framework was originally approved by the National Assembly in 2020 with implementation initially planned for 2022.
The opposition's challenge centers on tax fairness concerns, arguing that the digital asset tax creates unequal treatment compared to other financial investments. Lawmakers note that authorities scrapped broader financial investment taxes in 2024 to support capital markets while keeping the crypto tax, creating what critics call an inconsistent approach. The bill states that taxing digital assets alone places holders at a disadvantage, especially since domestic authorities treat virtual assets as commodities while applying securities-like taxation rules.
Technical implementation challenges also contribute to the debate. Lawmakers argue that calculating acquisition prices across multiple exchanges would strain compliance systems, with foreign participants facing added complexity. Critics warn that enforcement could become inefficient if transaction records remain fragmented across platforms.
Despite the legislative push, the National Tax Service continues preparations for monitoring crypto transactions, including building a 3 billion won AI-driven system scheduled for a pilot launch in November 2026 with full deployment by year-end. This system aims to track transfers, detect evasion, and calculate taxable gains.
The ruling Democratic Party has confirmed it will review the repeal bill, though party leaders haven't announced unified support. The measure now depends on cross-party agreement in the National Assembly, with legislative committees set to review the amendment in coming weeks before potential consideration by the full assembly.
