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Government moves to tax profit from bitcoin trade

Jan 22,2018
Financial regulators plan to use the details of all cryptocurrency transactions made by individual investors - starting as early as the end of this month - to prevent money laundering and enforce a transfer tax on profit from cryptocurrencies, signaling a possible embrace of the nascent commodity.

Officials from the Ministry of Strategy and Finance and National Tax Service said Sunday that they would require banks to maintain records of customers’ buying and selling of cryptocurrencies. The data will become the basis for authorities to check for money laundering and impose a tax.

A ministry official said that cryptocurrency exchanges, too, would be required to keep transaction records and submit them to banks, which will in turn hand them over to the government when regulators request them.

“Banks already have the legal duty to prevent money laundering, and we will be checking whether they are properly abiding by that duty,” the official said. “Cryptocurrency exchanges will have no choice but to follow the measures, given they cannot operate without banks.”

Under old guidelines on fraud prevention, financial authorities only checked whether transaction records were properly maintained and stored. Under the new guidelines, they will look into the identity of individual investors and their transaction details. Previously, there was also no way of knowing whether a person who had deposited money into a virtual account, anonymous bank accounts that are affiliated with cryptocurrency exchanges, was the actual investor.

Tax authorities plan to use data on the identity of individual sellers and buyers, the point of transaction and how much gains and losses are made.

The measures suggest the government may be ready to embrace cryptocurrency trading and regulate it, putting an end to flip-flopping in the past several weeks over whether it would completely shut down cryptocurrency exchanges.

Over the weekend, bitcoin, the most popular cryptocurrency, was trading in Korea at close to 15 million won ($14,000) on Saturday. By 6 p.m. on Sunday, it had fallen to about 14 million won, suggesting the market remains cautious about the government’s stance on cryptocurrencies.

Separate from the fraud prevention measures, the government plans to request a legislative amendment to laws governing bookkeeping so that cryptocurrency exchanges also have the duty to prevent money laundering.

Current regulations only apply to financial institutions like banks. A revision would suggest future legislation that might formally classify cryptocurrency trading as a financial instrument.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]