South Korean economists are unhappy with the government's proposal to tax Bitcoin and other cryptocurrencies a few days after reports have suggested it.
Any "tax crypto-currency" should be deleted and not applied, has said the country's academics local reporters this weekend.
The reason was singular and simple - taxes on an emerging asset class and a disruptive technology sector can block broader industrial growth in the country; one who suffers from an ongoing job crisis.
Taxing Bitcoin is "premature"
South Korea's economy is based on slow growth and a family business system called "chaebol", which makes the job market notorious and condemned for its low wages.
In view of the above, Korean economists believe that cryptocurrencies are a booming asset class, while blockchain technology presents long-term growth opportunities for the country.
Ask Sung Tae-yoon from Yonsei University. The educated Harvard professor says that implementing crypto-taxes is a "premature" decision, given that the market for digital assets is still developing and not as established as other sectors.
Sung believes that cryptocurrencies have a long way to go before they are regulated in the same way as fiat currencies. The professor is right - Bitcoin has been around since 2009, but cryptocurrencies only became widespread after 2018.
The above means that cryptocurrencies are, in all respects, still a nascent and not a decade old development. Sung explains:
"Any careless taxation or introduction of regulations can be a stumbling block for sustainable industry growth."
BTC gains to report
Korea's cryptocurrency tax decision came late last week after years of parliamentary deliberation and exchange. Until that date, cryptocurrencies were seen as a "safe, tax-exempt haven" in the country, with regulators and experts fiercely opposed to their legality.
Minister Hong Nam-ki has said that July will see a crypto tax in place in the country, although it continues to be updated and developed as the market matures. Individual transactions are unlikely to be taxed, but all capital gains will have to be reported.
The proposal will align Korea with countries like Japan, Singapore, the United States and others; where crypto earnings face the taxpayer's anger, but door-to-door transactions are not reviewed.
However, the crackdown would mean that Koreans will be more cautious about the cryptocurrency trade. The country has a dynamic cryptography industry, with blockchain projects like ICON and investment funds like Hashed leading the pack.
Avoid the financial crisis
However, not all economists oppose it. Regulation of the opinions of Kim Jin-ill of the University of Korea helps to minimize the potential losses that investors could face - like the complexity of derivatives and trading emerging before the financial crisis (in reference to the contracting economy of Korea in 2019).
Some reports suggest that Koreans are approaching the financial markets in search of high risks and rewards, unlike the western world’s search for stability in relation to returns.
If Bitcoin ends up being taxed, one can assume the possible implications for the wider cryptocurrency market - given the country's fascination with Bitcoin and related products.
In 2017, Korea was infamous for "Kimchi Premium", a short-term phenomenon that saw Bitcoin and other altcoins trade up to 45% more on Korean exchanges compared to global markets.
