Lawmakers urge digital asset framework before implementing taxation

At a forum held at the National Assembly on the 2nd, lawmakers argued that the Digital Assets Framework Act must be enacted before taxation is implemented. Democratic Party of Korea member Lee Kang-il expressed intent to present a legislative roadmap within the year, aiming for a possible bill passage in December.

Amid ongoing debates over the postponement of virtual asset taxation, arguments emerged at the National Assembly that the enactment of the Digital Assets Framework Act and preparations for taxation must take precedence. The demand is to establish basic market rules while simultaneously setting the necessary preparation items and implementation deadlines, providing sufficient time to meet those requirements.

The 'Forum on Urgent Review of the Competitiveness of the Domestic Digital Asset Market and Institutional Improvements in the AI Era' was held at the National Assembly Library on the 2nd to discuss the direction of virtual asset taxation and the enactment of the basic law. Attention was focused on the positions the government and the ruling party would present at the forum, following a meeting on the 30th of last month between the Democratic Party of Korea's policy committee, members of the National Assembly of the Republic of Korea's Finance and Economy Committee, and representatives of virtual asset exchanges, where Oh Gi-hyeong, the ruling party whip of the Finance and Economy Committee, stated that discussions regarding taxation should be finalized within one to two weeks.

In his congratulatory speech, Min Byeong-deok, a member of the Democratic Party of Korea, said, "If we consider both tax equity and market competitiveness, now is the time to postpone digital asset taxation," adding, "I believe it is shameless to attempt taxation before even a basic law has been established."

Min explained that during the discussions regarding the Financial Investment Income Tax, there was criticism that there were attempts to introduce advanced taxation while leaving the backward structure of the stock market intact. He argued that the same logic should be applied to digital assets, meaning the institutional framework and conditions to support the market must be established first.

To achieve this, he proposed that while enacting the basic law, specific implementation deadlines for each item required for taxation preparation should be set. He suggested that taxation should be postponed by clearly defining what needs to be prepared and by when, and then granting a period to fulfill those requirements. He noted that he is strongly advocating for the postponement of taxation within his party.

Min linked the necessity of institutional reform to the competitiveness of the domestic market. He explained that rather than treating the movement of assets to overseas exchanges as the problem itself, the reasons why investors and companies choose overseas markets over the domestic market should be examined.

"We must check whether there is a lack of trust in the market or whether the institutions are failing to keep pace with the speed of innovation," he said. "The answer lies in creating reasons to choose the domestic market." He also emphasized the need to create conditions where companies can take on challenges within predictable rules while providing sufficient protection for investors.

Lee Kang-il, a member of the Democratic Party of Korea, believed that even if there are insufficient parts in the basic law, it is necessary to codify the contents that can be agreed upon. He explained that a basic legal framework must be established first so that discussions can take place on how to expand the industry and which parts to correct or supplement within that framework.

Regarding the legislative schedule, he expressed the intent to receive the government proposal in November to discuss policy and legal issues. He added that efforts will be made to present a visible legislative roadmap within the year and, if possible, to push for the passage of the bill in December.

The government expressed a principled position of continuing to collect opinions and consult with the National Assembly of the Republic of Korea instead of providing a specific stance on whether to postpone taxation. Moon Gyeong-ho, head of the Income Tax Division at the Ministry of Finance and Economy, explained that during a field meeting on the 20th of last month, experts and industry officials expressed agreement with the principles of taxation but requested that the changes in the market environment since the legislation at the end of 2020 be reflected in the taxation system. He also noted that there were requests to comprehensively consider tax equity with users of overseas exchanges and the global policy environment.

"The government is contemplating a reasonable plan that the public can accept and that can be implemented stably in the field," Moon said. "We will listen to the various opinions presented at today's forum and work toward a conclusion through close communication with relevant ministries and sufficient consultation with the National Assembly."

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