Country overview

#24

South Korea

Country stats

Rating Points

355

This indicator describes the overall rating of a given jurisdiction on several parameters according to cryptocurrency operations - market volume, crypto regulation, business climate, taxation framework.

Crypto Penetration

Estimated percentage of crypto users out of the country's total population based on public data.

Legal Entities

Number of crypto companies registered in the country based on regulator data if available or other types of public data.

Regulation Points

170

An overall assessment of the granularity of crypto regulation in a given country. A high score is also given to countries where cryptocurrency transactions are highly regulated.

Amount of crypto users

2 072 000

Total amount of crypto users out of the country's total population based on public data.

Taxation points

This figure, according to our analysts' calculations, indicates the overall level of tax burden for cryptocurrency transactions in a given country. The higher the indicator, the lower the burden.

Market volume points

180

A rough estimate of this jurisdiction's retail crypto market relative to the rest of the world. The higher the indicator, the higher the market potential.

Status of crypto

Legally allowed

General status of cryptocurrency regulation in this jurisdiction.

Crypto payments

Legally allowed

The legal status of cryptocurrency payments for goods and services in a given country based on information from regulators, public data and feedback from our community.

Security Level

Safe place

The overall level of security in a given country based on open data.

Crypto Salaries

No info

The legal status of cryptocurrency salaries to employers in a given country based on information from regulators, public data and feedback from our community.

Business Climate

Medium

Overall assessment of the friendliness of this country for crypto-business. This indicator takes into account the cost of obtaining a license and the attitude towards crypto entities in the country.

Stablecoin Regulation

Basic

This indicator is evaluating the regulation of stablecoins in a given country. Complex regulation means that it is possible to issue steiblcoins and obtain a license for this activity. Basic regulation means that the issuance of stablecoins is possible, but not all legal aspects are defined in the law. Standard regulation means that there is a legal practice of steylcoin circulation in a given country.

Bad Factors

This section describes the unfavorable economic factors for crypto-business in a given country. These are countries that are under sanctions or on the FATF grey list and other factors.

Types of licenses

Crypto-to-crypto

This license type allows VASP to provide legal exchange from one cryptocurrency to another.

Crypto-to-fiat

This type of license regulates the exchange from cryptocurrency to fiat.

Wallet/Custody

This country has a legal licensing procedure for companies that store cryptocurrency - - crypto wallet providers and custodians.

Cryptofund

This indicator means that investment funds, trusts, and crypto funds can get regulator approval to provide their activity in the country.

Good

Medium

Bad

intro

Korea and Japan are the central cryptocurrency trading countries in Asia. South Korea has a vast crypto market and a loyal crypto regulation framework. This country has Implemented crypto regulation since 2017.

Security level

This a safe place according to its security level. The country has 74.7 points (from 100) for safety level in Numbeo crime rating (1). Homicide level (2) is 0,6 per 100,000 a year. Level of firearm-related death (3) 0,06 per 100,000 a year.

Crypto Payments

We still haven’t found any official source that confirms the legal status of crypto payments in South Korea. However, it looks like this is due to the lack of translation of some by-laws from Korean into English.

Moreover, according to Coinfirm overview (4), the Financial Services Commission (FSC) of South Korea has considered cryptocurrencies as “alternative currencies” and subject to taxation. This probably means that crypto payments are legal in the country.

Also, crypto payments with conversion are popular in South Korea. This type of service is provided by Paycoin (5), Bithumb Exchange (6), and other local payment providers.

Crypto Salaries

Companies in South Korea must pay their employees in Korean won (KRW) under the Labor Standards Act, and it is unclear whether paying salaries in cryptocurrency would be considered compliant with this requirement.

Legal

The Financial Services Commission (FSC) (6¹)and Korea Financial Intelligence Unit (6²) и(KoFIU) perform the regulatory functions in Korea.

The FSC licenses crypto exchanges and other VASPs while the KoFIU inspects them for AML compliance. VASPs also need to be registered by KoFIU.

The KoFIU recently approved (7) 36 VASPs - 27 exchanges and 9 other businesses. Large Korean banks back some of them. This is not surprising: the total number of crypto-traders in the country is estimated (8) at 6.9 million.

All regulators

Financial Services Commission (FSC);

Financial Supervisory Service (FSS);

Korea Financial Intelligence Unit (KoFIU);

National Tax Service (NTS);

Bank of Korea (BOK);

Korea Internet and Security Agency (KISA)

According to Coinfirm (9), the FSC is responsible for crypto licenses, which allow the following activities:

Sale or purchase of Virtual Assets

Interchange of one Virtual Asset with any other asset

Transfer of Virtual Assets for transaction, exchange, storage, etc., upon customers’ request

Storage or management of Virtual Assets

Acting as an agent or providing brokering or intermediating services related to the sale or purchase of VAs and the interchange of one VA with any other asset.

Tag	Regulator/License
#cryptotocrypto	FSA
#cryptotofiat	FSA
#cryptofund	FSA
#wallet/custody	FSA

Statista (10) states that KoFIU requirements include “proof that providers were using real-name bank accounts,” New AML rules were implemented in September 2021. Some cases of VASP violations of AML/CFT regulations can be found in the KoFIU press release in Korean (11).

Also, according to Coinfirm(11¹), there are some illegal crypto activities in South Korea:

The offering of margin trading of crypto assets is against the law, due to the extreme volatility that some crypto assets can experience. Issuing ICOs (Initial Coin Offerings) are banned by domestic companies and individuals in South Korea. New regulation framework for it is still in progress.

There is still no NFT regulation in South Korea, according to law.asia (12)

Quote

“As of today, there are no rules directly applicable to tokens other than virtual assets such as NFTs. However, the financial regulatory authorities have indicated that existing laws and regulations such as the Financial Investment Services and Capital Markets Act (FSCMA) and the AML Act can be applied, depending on the nature of the concerned tokens.”

New requirements for crypto entities (2023)

According to Coindesk (13), the FSC of Korea prepared new security token regulations in February 2023.

Details

Security tokens refer to the digitalization of securities under the Capital Markets Act(13¹) using distributed ledger technology, according to the guidance, and will apply only to digital assets that qualify. The guidance clarifies that stablecoins, which are crypto pegged to the value of other currencies such as the U.S. dollar and are used for payments or as a medium of exchange, will likely not fall under the definition of securities. Digital assets that have no issuer and do not have to "fulfill the obligations commensurate with the investor's rights," will also likely fall outside of the scope of security tokens. "On the other hand, digital assets corresponding to securities must be issued and distributed in compliance with all securities regulations under the Capital Markets Act," the FSC said.

This year (2023), on July 1, the country's parliament passed (14) 19 legislative changes to protect the interests of crypto investors. Korea is raising requirements for VASPs similar to Japan, including keeping user and exchange funds separate and some in cold wallets.

As part of new crypto regulation updates in South Korea, the Financial Services Commission (FSC) announced a new bill (15) requiring all legal entities that issue or hold cryptocurrencies like Bitcoin to disclose them.

Taxation

According to law.asia (16). “For tax purposes, cryptocurrency should be treated as an asset. Indeed, a more accurate English translation of the Korean term for a cryptocurrency (가상자산) would be a virtual asset.”

Tax name	Index
PIT tax Min	6%
PIT tax Max	45%
Min Individual CGT (for crypto)	0
Max Individual CGT tax (for crypto)	22.5%
Corporate tax (CIT)	27.5%
Wealth tax Min	0
Wealth tax Max	0
Mining tax
TDS tax

PIT and DeFi taxation

It’s unclear how DeFi, airdrops, and crypto payments to individuals are taxable in South Korea since the local tax authority has published no guide about it in English, and we haven’t found such a document in Korean.

So, we need to find out how PIT is applied for individual crypto gains and interpret it as individuals need to pay CGT tax for all crypto profits. We also encountered confirmation of this version in the media. Still, we inform you that income tax in South Korea has a maximum rate of 45%, according to PWC tax summaries (17).

CGT tax

Unlike Japan, the country's government does not impose punitive taxes on the crypto industry. In 2022, Korea's new president has postponed (18) the introduction of a 20% tax on profits from crypto-investments for two years; a more moderate rate of 16.5% remains until 2025.

According to law.asia(19), “worldwide cryptocurrency gains over KRW2.5 million (USD 1,750) will be taxed at a flat rate of 22%” from 2025. However, it’s unclear if a 16,5% tax exemption up to 2025 works for all residents or only Korean citizens. Law.asia experts suggest a 22.5% tax rate could begin as early as 2023.

CIT tax

As with other types of taxable gains, cryptocurrency gains are added to the other annual taxable corporate income with income over KRW200 million taxed progressively at 22% (for the KRW200 million to KRW20 billion portions of payment); 24.2% (for the KRW20 billion to KRW300 billion portions); and 27.5% for any income over KRW300 billion.

Links

1)Numbeo crime rating. Statistics

2)Homicide level. The list of countries by UNODC homicide rate.

3) Firearm-related death. Historical list of countries by firearm-related death rate

4, 9, and 11)South Korea Crypto Regulations. PDF-file

5)Paycoin Brings Crypto Payments to Korea. Article

6)Bithumb CASH. World’s first multi-purpose cryptocurrency payment platform

6¹)Financial Services Commission

6²)Korea Financial Intelligence Unit

7 and 8)KoFIU Unveils H2 2022 Survey Result on Virtual Asset Service Providers.

10)Cryptocurrency in South Korea - statistics & facts.

11¹)Coinfirm

12)Damage controls. After months of clamping down and chaos, South Korea is looking hard at how to create a safe space for cryptocurrency to flourish while safeguarding investors. Article

13) South Korea Issues Guidelines for Regulating Security Tokens as Legislation Looms

13¹)Capital Markets Act

14)South Korea Approves Crypto Investor Protection Legislation. Article

15)South Korea to ask firms to disclose crypto holdings starting in 2024. Article

16 and 18)A comparison of tax laws: South Korea.

17)PWC Republic of Korea.

19)law.asia

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intro

Security level

Crypto Payments

Also, crypto payments with conversion are popular in South Korea. This type of service is provided by Paycoin (5), Bithumb Exchange (6), and other local payment providers.

Crypto Salaries

Legal

The Financial Services Commission (FSC) (6¹)and Korea Financial Intelligence Unit (6²) и(KoFIU) perform the regulatory functions in Korea.

The FSC licenses crypto exchanges and other VASPs while the KoFIU inspects them for AML compliance. VASPs also need to be registered by KoFIU.

All regulators

Financial Services Commission (FSC);

Financial Supervisory Service (FSS);

Korea Financial Intelligence Unit (KoFIU);

National Tax Service (NTS);

Bank of Korea (BOK);

Korea Internet and Security Agency (KISA)

According to Coinfirm (9), the FSC is responsible for crypto licenses, which allow the following activities:

Sale or purchase of Virtual Assets

Interchange of one Virtual Asset with any other asset

Transfer of Virtual Assets for transaction, exchange, storage, etc., upon customers’ request

Storage or management of Virtual Assets

Acting as an agent or providing brokering or intermediating services related to the sale or purchase of VAs and the interchange of one VA with any other asset.

Tag	Regulator/License
#cryptotocrypto	FSA
#cryptotofiat	FSA
#cryptofund	FSA
#wallet/custody	FSA

Also, according to Coinfirm(11¹), there are some illegal crypto activities in South Korea:

There is still no NFT regulation in South Korea, according to law.asia (12)

Quote

New requirements for crypto entities (2023)

According to Coindesk (13), the FSC of Korea prepared new security token regulations in February 2023.

Details

Taxation

Tax name	Index
PIT tax Min	6%
PIT tax Max	45%
Min Individual CGT (for crypto)	0
Max Individual CGT tax (for crypto)	22.5%
Corporate tax (CIT)	27.5%
Wealth tax Min	0
Wealth tax Max	0
Mining tax
TDS tax

PIT and DeFi taxation

CGT tax

CIT tax

Links

1)Numbeo crime rating. Statistics

2)Homicide level. The list of countries by UNODC homicide rate.

3) Firearm-related death. Historical list of countries by firearm-related death rate

4, 9, and 11)South Korea Crypto Regulations. PDF-file

5)Paycoin Brings Crypto Payments to Korea. Article

6)Bithumb CASH. World’s first multi-purpose cryptocurrency payment platform

6¹)Financial Services Commission

6²)Korea Financial Intelligence Unit

7 and 8)KoFIU Unveils H2 2022 Survey Result on Virtual Asset Service Providers.

10)Cryptocurrency in South Korea - statistics & facts.

11¹)Coinfirm

12)Damage controls. After months of clamping down and chaos, South Korea is looking hard at how to create a safe space for cryptocurrency to flourish while safeguarding investors. Article

13) South Korea Issues Guidelines for Regulating Security Tokens as Legislation Looms

13¹)Capital Markets Act

14)South Korea Approves Crypto Investor Protection Legislation. Article

15)South Korea to ask firms to disclose crypto holdings starting in 2024. Article

16 and 18)A comparison of tax laws: South Korea.

17)PWC Republic of Korea.

19)law.asia