Deputy Prime Minister and Finance Minister Hong Nam-ki attends a parliamentary audit of the Ministry of Economy and Finance at the National Assembly in Yeouido, Seoul, Wednesday. Yonhap
Deputy Prime Minister and Finance Minister Hong Nam-ki attends a parliamentary audit of the Ministry of Economy and Finance at the National Assembly in Yeouido, Seoul, Wednesday. Yonhap


FSC chair pledges tighter scrutiny for Upbit operator’s monopoly

By Lee Kyung-min

Deputy Prime Minister and Finance Minister Hong Nam-ki said that taxation on gains from cryptocurrency trading will take effect next year as planned, in a clear show of distance from mounting calls from both ruling and opposition party lawmakers to delay the enforcement ahead of next year’s presidential election.

The finance ministry initially planned to impose a 20 percent tax starting Oct. 1 on gains of over 2.5 million won ($2,125) made in a one-year period, but it was delayed for three months due to a lack of taxation infrastructure.

“Any further delay in the already postponed enforcement will lead to the loss of public trust in government policy and undermine stability in the legal system,” he said during a parliamentary audit of the Ministry of Economy and Finance at the National Assembly on Yeouido, Seoul, Wednesday.

The taxation infrastructure has been established, Hong added, as backed by real-name accounts issued by commercial lenders and user data preserved and monitored by crypto exchanges.

“We have been preparing measures for the taxation for the past two years. The new law governing the digital asset, coupled with a revision to the existing one provides sufficient grounds for the government.”

The remark came in response to a question raised by Rep. Yoo Gyeong-joon of the main opposition People Power Party on whether the government is pushing for the enforcement despite what he claims to be an unstable system for tax administration.

The former Statistics Korea head further asked the plan be delayed, saying the government has yet to find measures to identify taxable income from crypto trading by users of overseas exchanges.

“No cross-border cooperation measures are in place on taxation on crypto trading gains. It simply is unfair taxation for users of local exchanges as opposed to those who trade overseas,” Yoo said.

Deputy Prime Minister and Finance Minister Hong Nam-ki attends a parliamentary audit of the Ministry of Economy and Finance at the National Assembly in Yeouido, Seoul, Wednesday. Yonhap
Financial Services Commission (FSC) Chairman Koh Seung-beom attends a parliamentary audit of the FSC at the National Assembly in Yeouido, Seoul, Wednesday. Yonhap


Meanwhile, Financial Services Commission Chairman Koh Seung-beom said he will consider strengthening standards for the listing and delisting of cryptocurrencies, to prevent large exchanges from raking in hefty trading fee incomes at the expense of investors.

“We will discuss requirements on listing and delisting of cryptocurrencies, alongside how the crypto businesses operate,” he said at the National Policy Committee audit of the FSC at the National Assembly in Yeouido.

The comment was in response to a question from Rep. Min Byoung-dug of the ruling Democratic Party of Korea (DPK) regarding a lack of clear standards on coin listing and delisting that continued to result in investor losses.

The lawmaker pointed out that the FSC guidance on coin listing and delisting for Upbit, the top crypto exchange operated by Dunamu, are each only about two pages long, a reason he said was how the exchange grew to account for 80 percent of the market share over the past two and a half years.

“A total of 298 coins were listed by Upbit, about half of which, or 145, have been delisted,” Min said. “This shows the reckless trading of altcoins, those other than bitcoins, enabled by Upbit which received 4 trillion won in listing fees and 31.4 billion won in trading fees.”

Koh said he will look into whether business practices by Dunamu concerning unlisted stock trading services and monopoly on digital asset market fees violate consumer protection regulations.

“We need to closely monitor whether the current business practices cause damage to users,” he said.

About 5,500 unlisted stocks are traded on an unlisted trading platform jointly launched by Dunamu and Samsung Securities in 2019. Over 100,000 trades were made as of June by more than 650,000 users. The number of platform app downloads exceeded 1 million.

The financial regulator said he will consider requiring crypto exchanges to refund damage suffered by victims of voice phishing, a form of telecommunication fraud.

This seeks to expand the scope of the definition of financial services firms subject to recovery in consumer damages to include digital asset exchanges. Currently, only commercial lenders are responsible for the recovery of monetary damages from telecommunication frauds.

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