Another day, another event in South Korea. This time it’s the fact that the government will be levying taxes on the emerging market of cryptocurrency exchanges. A local news publication in South Korea noted on January 22 that the government of South Korea will now be taxing these cryptocurrency exchanges at twenty-two percent corporate tax rate, authorities will also be laying down a 2.2% local income tax as well. This new event brings a prominent question to mind, If the government seeks to tax the emerging market, is it not implicitly stating that it is accepting the world of cryptocurrencies within South Korea? They see the speculation taking place, they see the money flow, they see that it will continue, so why not tax it? The emerging market could serve as a revenue generator in multiple ways for the government and quickly shun it or stunt the growth of the market would be detrimental to the government regarding lost revenues.
Assumptions that could be drawn from this event is that the government doesn’t tax concepts that it deems illegal, it prohibits and actively takes actions to police it, it would receive the same treatment as drugs, prostitution and other items that are considered to be illegal.
This announcement from the government comes at a time when there has been a wave of events in this space. The most recent events have been that there has been a focus on the aspect of money laundering. The government seems to have conducted this because it seems that a substantial portion of the revenues of South Korean banks have been derived from their involvement in the world cryptocurrency trading. The banks have increased their revenues by a factor of thirty-six, solely from commissions received in this virtual currency space. A division of the government, the FSS, has conducted a significant probe into many of the big banks in South Korea, they intended to make sure that the banks were keeping in line with the policies in regards to anti-money laundering. The money that is being derived from virtual accounts is causing great concern for the government in the matter of money laundering.
Follow the money
Local news has reported that the South Korean exchange Bithum has derived an excess of ($290,000,000) from their activities in the space and thus, are required to pay about 20 percent plus the 2.2 percent for local taxes if they were to abide by the tax percentages issued by the government.
The banks would have to pay regular corporate taxes on these gains if they fall into the category of making over 18 million dollars.
It’s all about the money
The official implications seem to be that the government doesn’t want the money to flow into the wrong hands, hence the anti-money laundering stance, and, as always, the government wants a piece of the action.