South Korea Moves Toward Unified Crypto Framework as Tax Repeal Debate Intensifies

What Happened

South Korea's Financial Services Commission informed the National Assembly this week that it plans to introduce a unified Digital Asset Basic Act in collaboration with the ruling Democratic Party. The proposed legislation would consolidate regulatory standards for stablecoin issuance and circulation, digital asset business operations, exchange licensing, disclosure requirements, internal control frameworks, and system resilience benchmarks.

According to a report from Edaily published Wednesday, the FSC delivered the update ahead of a scheduled policy briefing. The move comes after months of legislative gridlock, with ten separate digital asset and stablecoin bills currently stalled in Parliament due to disagreements among lawmakers and industry stakeholders.

Key Sticking Points in the Draft Framework

Two major disputes continue to block consensus. First, whether won-denominated stablecoin issuers must be majority-owned by banks—a provision that would effectively hand control to traditional financial institutions and limit fintech participation. Second, whether ownership concentration limits should apply to major cryptocurrency exchanges, potentially forcing structural changes at dominant platforms.

The FSC has not yet announced a timeline for when the consolidated bill will be formally introduced or how it will navigate these contentious issues.

Opposition Pushes to Abolish Crypto Income Tax

Separately, the National Assembly's Finance and Economic Planning Committee was scheduled Wednesday to table an opposition bill that would eliminate South Korea's crypto income tax entirely before it takes effect on January 1, 2027. The Income Tax Act amendment was introduced on March 19 by People Power Party lawmaker Song Eon-seok and seeks to delete the provision that taxes income from transferring or lending digital assets.

Once tabled, the bill is expected to move to the committee's tax subcommittee for detailed review. A parallel citizen petition with more than 50,000 signatures is also set to go before a petitions subcommittee. However, Edaily reports that neither subcommittee has been fully constituted, and no review dates have been set.

Why It Matters

South Korea's regulatory uncertainty has left the country's vibrant cryptocurrency market in legal limbo. A consolidated government-backed bill could provide a baseline framework for negotiations and help break the legislative logjam. Without clear stablecoin rules, domestic issuers face operational ambiguity, while exchanges lack consistent compliance standards.

The ownership disputes are not merely technical. Requiring bank majority ownership of stablecoin issuers would entrench incumbents and potentially stifle innovation from fintech startups and blockchain-native companies. Similarly, ownership caps on exchanges could force restructuring at major platforms, affecting liquidity, user access, and market stability.

The Tax Debate Reflects Broader Fairness Concerns

The crypto income tax has become a flashpoint. The government and ruling Democratic Party argue that taxation is necessary for fairness and revenue generation. The opposition People Power Party counters that most ordinary stock investors in South Korea remain exempt from capital gains taxes, making it inequitable to single out cryptocurrency holders for a 20% tax plus 2% local levy on annual gains exceeding 2.5 million won (approximately $1,700).

On May 7, the Finance Ministry reaffirmed that the tax would proceed as scheduled after repeated delays. The opposition's repeal effort, combined with significant public pressure reflected in the petition, sets up a high-stakes political fight over whether the tax will actually be implemented.

The Numbers

Tax Structure Breakdown

What's Next

Legislative Process for the Consolidated Bill

The FSC's drafting timeline remains unspecified. Once introduced, the consolidated Digital Asset Basic Act will need to reconcile competing interests on stablecoin ownership and exchange concentration limits. Given that ten bills are already pending, the consolidated proposal may serve as a negotiating baseline, but passage is far from certain without compromise on the core disputes.

Tax Repeal Timeline

The opposition's tax repeal bill is expected to be referred to the Finance and Economic Planning Committee's tax subcommittee for detailed consideration. The citizen petition will go before a petitions subcommittee. However, neither subcommittee has been fully constituted, meaning no review dates are currently scheduled.

Even if the opposition succeeds in advancing the repeal bill through committee, it would still require a floor vote in the National Assembly. With the ruling Democratic Party supporting the tax and holding significant seats, passage is uncertain. The political dynamic may shift depending on public pressure, market conditions, and whether the government perceives revenue or fairness benefits from the tax.

Industry and Market Response

South Korea is home to one of the world's most active retail crypto trading markets. Regulatory clarity on stablecoins and exchanges would affect major platforms and could influence whether global stablecoin issuers enter the Korean market. The tax debate will likely intensify as the 2027 deadline approaches, with exchanges, investors, and advocacy groups lobbying lawmakers and mobilizing public opinion.

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