South Korea moves to abolish crypto tax

TLDR

South Koreas conservative People Power Party has filed a bill to abolish the planned 22% tax on crypto gains, but it is not law yet.

1. The bill would delete digital asset income from the Income Tax Act, cancelling a 22% tax on gains above 2.5 million won scheduled for 1 Jan 2027, but parliament must still vote.
2. Lawmakers cite an estimated $110 billion in capital flight, unfair treatment versus stocks, and double taxation and enforcement issues as reasons to scrap the tax.
3. If abolition passes, it favors onshore trading and liquidity; if it fails, a strict 2027 tax plus AI based monitoring will shape how Korean users trade and hold crypto.

Deep Dive

1. Bill And Current Status

The People Power Party (PPP) has introduced a bill to amend the Income Tax Act and remove all provisions on digital asset income, effectively scrapping the upcoming crypto gains tax before it starts. Under current law, crypto gains above 2.5 million KRW would face a 20% national income tax plus 2% local tax starting 1 Jan 2027, after several delays from earlier target dates such as 2022 and 2025, as described by local coverage summarized in Cointelegraph.

As of March 2026, crypto gains in South Korea are still untaxed while the 2027 start date remains on the books. The Democratic Party, which holds the National Assembly majority, has said it will review the proposal but has not committed to full abolition, so the change is not guaranteed.

2. Why Lawmakers Are Pivoting

Reports indicate roughly $110 billion worth of digital assets has already moved from Korean exchanges to overseas platforms, as investors tried to avoid the planned 22% levy on relatively small gains thresholds, according to CryptoNews summary of the abolition bill. The same report highlights that stock investors enjoy a much higher tax free threshold of about 50 million KRW, which many see as discriminatory toward the roughly 6 million Korean crypto traders.

PPP lawmakers also argue that because virtual assets are treated as goods for value added tax, layering an income tax on top risks double taxation, and that calculating cost basis for overseas trading will be hard to enforce, as detailed in the eDaily based write up on CoinMarketCaps community news.

3. Implications And What To Watch

If the tax is abolished, major exchanges like Upbit and Bithumb could operate without a special crypto gains tax, which commentators expect would pull activity back onshore and make the kimchi premium a cleaner sentiment signal rather than a tax workaround, as argued in a CoinsKid analysis of the proposal. That would generally be positive for local liquidity and price discovery.

If the bill fails, the 22% tax still arrives in 2027 and will be backed by an AI powered transaction analysis system that the National Tax Service is already building, tightening reporting and enforcement rather than easing it. The key signals are whether the Democratic Party formally backs repeal, how the final compromise treats thresholds versus stocks, and whether Korea shifts toward a unified financial investment tax that quietly brings crypto back into scope later.

Conclusion

South Korea has moved from repeatedly delaying a harsh crypto tax to seriously debating scrapping it entirely, driven by capital flight and fairness concerns. The final outcome will decide whether Korean traders face a relatively friendly onshore environment or a strict 2027 tax with heavy surveillance, so watching the National Assembly debate and any compromise on thresholds or unified investment taxes will be crucial.