Korea to Tax Stablecoin Payments as Crypto Levy Nears

When South Korea begins taxing cryptocurrency next year, using stablecoins such as Tether (USDT) to pay for goods or services could also trigger a tax bill. If a stablecoin is worth more at the moment of payment than when it was acquired, the difference counts as taxable income. Stablecoins are increasingly used for payments, but the tax code does not distinguish them from cryptocurrencies held for investment, and calls are growing for the rules to be revised with just over 100 days left before the levy takes effect.

Income from transferring or lending cryptocurrency will be taxed starting Jan. 1, the government said on the 13th. Annual gains and losses are netted, 2.5 million won is deducted, and the remainder is taxed at 20%. Including local income tax, the effective rate is 22%.

Lee Hyung-il, the nominee for deputy prime minister and minister of economy and finance, said on the same day that "specific standards will be announced through a National Tax Service public notice within the year." The remarks reaffirmed the government's plan to implement the tax as scheduled from next year.

Market participants broadly agree that crypto income should be taxed but say the current framework cannot properly capture a market that has changed rapidly. The tax structure was designed in 2020, before stablecoins, staking, decentralized finance (DeFi) and real-world assets (RWA) spread quickly as new products and trading methods.