South Korea has announced a delay in the introduction of its cryptocurrency capital gains tax until 2029, extending the tax-free period by two years as authorities plan to strengthen regulatory oversight and connect exchange data with the United States, yna.co.kr reports.

Finance Minister Lee Hyoung-il announced the proposal on Thursday, acknowledging that the government would be postponing the controversial tax for the fourth time. The repeated deferrals reflect how contentious the levy has remained: unlike gains from listed stocks held by minority shareholders, which are exempt under Korean securities rules, digital asset gains were set to be taxed — a disparity that has fueled much of the opposition.

The policy was originally scheduled to take effect in January 2022. Under the plan, a 22% local income tax would be imposed on all cryptocurrency-related gains exceeding 2.5 million won (roughly US$1,800). Under the revised timetable, cryptocurrency gains realized ahead of the new effective date will remain outside the scope of the levy.

Regulatory Uncertainty and Market Implications

Officials argue that implementing the tax before international information-sharing systems become operational could disadvantage local exchanges and complicate enforcement against overseas trading activity, an area where authorities currently have limited visibility into taxable gains.

Future tax liabilities are not eliminated under the postponement. According to the government's plan, the additional time will be used to develop a comprehensive taxation network, an approach considered more likely to impose further limitations on investors in the future than a premature implementation containing various legal loopholes.

The government also intends to introduce provisions allowing investors to carry forward cryptocurrency investment losses for up to three years, potentially reducing taxable gains in subsequent periods.

Further Crypto Regulation Remains a Priority

South Korea will also establish a separate working group to further refine taxation rules and simplify reporting requirements for investors, taking into account the complexity of reporting digital asset transactions and traders on exchanges.

Legislative amendments are expected to reach the National Assembly in 2027, leaving roughly two years for the framework to be finalized and implemented ahead of the 2029 start.

Authorities reported ongoing coordination with the Financial Services Commission, the country's top financial regulator, to accelerate digital asset legislation, with the aim of providing greater transparency and investor protection.

For the industry, the proposed extension is positioned as a transitional stage intended to improve the competitiveness of the digital asset market, even as stricter tax enforcement is introduced. Key markers to watch are the working group's reporting-simplification proposals, the 2027 legislative amendments, and the resulting digital asset legislation.