A Tax Bomb? Or Just the System Working Out Some Kinks?

The National Tax Service has reportedly forced the cryptocurrency exchange to pay KRW 80.3 billion in additional taxes, arguing that the exchange should pay foreigners’ withholding taxes made from crypto investments.

The Korea Herald reports, “A foreign corporation without a permanent establishment in Korea is subject to withholding tax but the relatively new cryptocurrency industry is not yet subject to this taxation rule.”

As one might expect, Bithumb — and other cryptocurrency exchanges, for that matter — are reacting poorly to the government taxing them without first establishing a standard for taxation. Indeed, Bithumb is appealing the order, and even the National Tax Service is trying to confirm what standard was applied. According to Korean-language blockchain news website Block Post, some within the industry regard this kind of “tax bomb” — coming amidst a slumping cryptocurrency market — as little different from an order to shut down exchanges.

Writing at Coinspeaker, Jeff Fawkers expresses his concern. “The government didn’t put enough time into developing strict rules of taxation,” he writes. “Instead, they are trying to impose some shady laws and clamp down on firms with big wallets.”

Being a cup-half-full sort of person, this writer wants to believe this is simply a bureaucratic misstep resulting from Korea’s state of regulatory flux, not an exercise in state-led grand larceny.

We know the Korean government is preparing the legal framework to tax cryptocurrency earnings. Korean lawmakers are also in the process of bringing cryptocurrency into the institutional mainstream. Expect some bumps as the system works out the kinks.

Also in the Korean blockchain space…

Virgil Griffith’s month from hell

(By Robert Stevens, Decrypt, Dec. 29)

Ethereum researcher Virgil Griffith is having a really bad month. He was arrested at LAX on Thanksgiving Day after speaking at a blockchain conference in Pyongyang, with the US Department of Justice accusing him of helping North Korea skirt sanctions through blockchain and crypto. And now a judge in New York has denied him bail, judging him a flight risk.

Bank of Korea to organize taskforce for CBDC research

(By Park Jae-hyuk, Korea Times, Dec. 27)

The Bank of Korea’s view of CBDCs seems to be evolving. The central bank announced last week it would put together a task force dedicated to CBDCs to better understand crypto assets.