South Korea advances stablecoin legislation while opposition moves to eliminate crypto taxation
South Korea's FSC is developing a comprehensive digital asset bill addressing stablecoins and crypto exchanges, as opposition legislators work to eliminate the planned 22% cryptocurrency tax scheduled for 2027.
The Financial Services Commission (FSC) of South Korea is reportedly preparing to formulate a unified Digital Asset Basic Act in collaboration with the ruling Democratic Party, offering legislators a government-supported framework that addresses stablecoins and the wider cryptocurrency ecosystem following several months of postponements.
Based on a Wednesday report from Edaily, the FSC informed the National Assembly prior to a policy briefing session of its intention to put forward a unified legislative proposal. The bill would reportedly encompass regulations for stablecoin issuance and distribution, operational guidelines for digital asset businesses, requirements for exchange market entry, disclosure obligations, internal control mechanisms and standards for system resilience.
A unified proposal backed by both the government and ruling party could establish a core framework for legislative negotiations. Currently, Parliament has 10 distinct digital asset and stablecoin bills awaiting consideration, and ongoing disagreements have blocked South Korea from resolving critical components of its second-phase cryptocurrency regulation.
The FSC has yet to determine the specific timing or method for introducing the consolidated legislation. Unresolved contentious issues include whether issuers of won-pegged stablecoins must be predominantly owned by banks and whether major cryptocurrency exchanges should face ownership restrictions.
Opposition crypto tax repeal bill heads for review
In a separate development, the National Assembly's Finance and Economic Planning Committee had scheduled a Wednesday session to introduce an opposition-sponsored bill seeking to eliminate South Korea's cryptocurrency income tax ahead of its scheduled Jan. 1, 2027 enforcement date.
The amendment to the Income Tax Act was submitted on March 19 by Song Eon-seok, a lawmaker from the People Power Party. The amendment seeks to remove the clause imposing taxes on earnings derived from transferring or lending digital assets. Following its introduction, the measure is anticipated to be forwarded to the committee's tax subcommittee for in-depth examination, according to Edaily's reporting.
An additional repeal petition that has garnered support from over 50,000 citizens is also anticipated to be presented to a petitions subcommittee. Nevertheless, neither subcommittee has completed its formation, and no dates for review proceedings have been established.
Starting Jan. 1, 2027, earnings from transferring or lending cryptocurrency that surpass 2.5 million won (approximately $1,700) per year will be subject to a 20% tax in addition to a 2% local income tax.
The government along with the ruling Democratic Party favor moving forward with the tax implementation, whereas the opposition contends that imposing taxes on cryptocurrency while the majority of regular stock market investors remain tax-exempt is inequitable. On May 7, the Finance Ministry announced the tax would move forward as planned following multiple postponements.