South Korea’s debate over taxing digital assets has intensified after reports that investors moved roughly $110 billion to offshore platforms to avoid a planned 22% tax. Under current law, individuals would be taxed on annual crypto gains above 2.5 million won, or about $1,781. By contrast, the tax-free threshold for domestic stock investors is set at 50 million won, around $35,600. That gap has drawn criticism as unfair to the country’s more than six million crypto traders.
Ruling party pushes beyond delay toward full repeal
The proposal from the ruling People Power Party goes beyond the earlier decision in December to postpone enforcement for two years. It seeks to remove cryptocurrencies from the tax base entirely. With large sums continuing to leave local platforms, lawmakers are reassessing both the legal structure and the broader economic effects. The Democratic Party, which holds a majority in the National Assembly, is now also discussing a complete repeal.
The law has not changed yet. Until the National Assembly votes, the tax framework technically remains in place, and the obligation is still set for 2027 unless lawmakers decide otherwise. That has put upcoming parliamentary debates at the center of attention for the domestic crypto industry.
Capital flight and global competition reshape the policy discussion
South Korea’s urgency is also tied to international competition in digital finance. The report says U.S. regulators have recently taken a more favorable approach to the sector, pushing Korean policymakers to review their stance carefully so the country does not lose ground in the digital economy race. The issue now reaches beyond tax treatment alone and into whether domestic trading activity can be pulled back onshore.
Industry watchers say that if major exchanges such as Upbit and Bithumb are allowed to operate tax-free under clear rules, local trading volumes could recover. In that case, the so-called kimchi premium—the price gap between Korean and overseas crypto markets—could again become a useful market signal.
Past enforcement spending may lose relevance
The Democratic Party had historically favored a more conservative line on crypto regulation, but the scale of the recent outflow has shifted the discussion toward practical measures. Officials believe that if the digital asset tax is abolished entirely, the incentive to move funds overseas could disappear at once.
There is also a policy cost to consider. South Korea’s tax authorities have already spent nearly 3 billion won on an AI-powered monitoring system designed to track digital asset transactions for income-based compliance. If the tax is removed, much of that infrastructure could lose its original purpose.