Basic Act Before Tax

South Korea's digital asset tax, scheduled to take effect on January 1, 2027, is now facing a serious challenge from inside the ruling party. Min Byeong-deok, senior deputy chair of the policy committee of the Democratic Party of Korea, said in a Facebook post published on Monday, September 22, that the levy should begin only after the Digital Asset Basic Act — a market-wide framework bill he personally sponsored last year — has been passed.

Min accepts the principle of taxation outright: "Where there is income, there is tax," he wrote, adding that digital assets "cannot be an exception." What he disputes is readiness. In his assessment, Seoul has not yet built the machinery to collect the tax fairly.

His first concern is the cross-border information gap. Under the Crypto-Asset Reporting Framework (CARF) — the international standard for automatic exchange of crypto transaction data between tax authorities — the first exchange of data with partner jurisdictions is set for 2027. If taxation starts that same January, income earned on domestic exchanges would be visible while offshore gains remain invisible. "In effect," he argued, "only those who traded diligently at home would pay tax."

Min warned that the imbalance could push investors toward overseas venues, shrinking not only the digital asset tax base but also the corporate tax paid by domestic operators and the value-added tax collected on trading fees. Such a migration would reward unlicensed offshore platforms at the expense of regulated Korean businesses.

The opposition People Power Party has, citing its own infrastructure concerns, already come out against the 2027 start, meaning resistance to the timetable now spans both major parties.

Scope compounds the timing dispute. The Basic Act covers every virtual asset, from Bitcoin (BTC) to meme coins such as Dogecoin (DOGE), and would define the legal status of staking, lending, airdrops and hard forks, alongside operator obligations and user protections — the regulatory skeleton Min says must exist before any tax is collected on income from the broader blockchain economy. If the levy starts before the bill clears the National Assembly, those legal definitions would remain outstanding on the day the first taxable transactions occur.

Losses Ignored, Gains Taxed

Min's second set of objections targets the levy's design rather than its existence. Under the current framework, income from transferring or lending virtual assets is taxed at 20% on annual gains above 2.5 million won, or a combined 22% once local income tax is included. The first filings for 2027 income would fall in the May 2028 comprehensive income tax season.

What the rules lack, he argued, is any loss carryforward — losses in one tax year cannot offset gains in the next. He illustrated the distortion with a worked example: an investor who loses 10 million won in year one and earns 10 million won the following year nets zero across the two years, yet would owe 1.65 million won in tax under the current system. Noting that the United States and the United Kingdom apply capital-gains rules that permit loss carryforward, Min urged Seoul to introduce a minimum five-year window.

A third gap concerns cost basis. The standards for calculating acquisition prices are delegated to a presidential decree that has not yet been issued, and Min warned that unclear rules could leave investors paying more than they actually owe or carrying the blame for filing errors. Because the first filings for 2027 income fall in May 2028, the missing decree is one of the concrete steps still outstanding before Korean investors face the new reporting regime.

His final demand is transparency. The government should publish expected revenue alongside administrative and compliance costs before launch, he said, pointing to United Kingdom, which discloses projected receipts, transition spending and business burdens together for its own CARF adoption. He also pressed the National Assembly and the government to attach completion deadlines and verification standards to each preparatory task, so that a delay cannot become an indefinite deferral.

Framing his position, Min said the goal is "not to avoid tax, but to collect it properly," pledging tighter crackdowns on unfair trading and stronger investor protection during any preparation period.

Government Holds Its Ground

The government, however, is standing firm. Officials have maintained that taxation will proceed as planned on January 1, 2027, leaving the sequencing dispute unresolved. The Basic Act debate also ties into earlier Seoul policy work on won-pegged stablecoin issuance and, more broadly, the ongoing global discussion over central bank digital currency (CBDC) infrastructure.

At the center of the controversy is Min's own Facebook statement, which lays out in concrete detail the three missing foundations — cross-border data exchange, loss carryforward and a cost-basis decree — and pins any delay to passage of the Basic Act he sponsored. The lawmaker characterizes the dispute as one of sequencing, not opposition to taxation, while the government's fixed statutory date currently collides with a framework bill that has yet to clear the National Assembly.

The markers to watch are specific: whether the Basic Act advances in the National Assembly, whether the cost-basis decree is issued, and whether the government publishes the revenue and compliance-cost figures before the statutory start date. With both major parties now questioning the start date and officials refusing to move it, the coming legislative months will determine whether Korea's digital asset rules launch as scheduled — and whether domestic trading volume stays onshore or drifts offshore once the levy takes effect.