The government will soon announce a comprehensive package of steps to tackle speculative investment in virtual currencies, including taxing cryptocurrency transactions, Strategy and Finance Minister Kim Dong-yeon said Thursday.
Kim said the government is studying what kinds of taxes to levy on virtual money.
“They may be subject to tax. We are considering diverse scenarios, such as whether they are capital gains or other income, as well as alternatives such as steps taken by other countries,” he told a session of the National Assembly.
When asked what the government deems virtual currencies to be, Kim said, “There is no consensus regarding their definition, but it is clear they are not legal currencies.”
He noted there is “irrational, overheated speculation” in virtual currencies. “The government is closely monitoring trading. We will strictly cope with crimes involving virtual currencies.”
Kim said the justice ministry, financial regulator, antitrust agency and related ministries are studying ways to effectively regulate virtual currencies.
The government will “announce a comprehensive package of steps soon,” he said.
Kim reaffirmed the ministries have not agreed on closing cryptocurrency trading exchanges, an idea proposed by the justice ministry.
He continued to stress that blockchain technology, which is basis of virtual currencies, should be developed.
“There are diverse ideas regarding whether blockchain and cryptocurrencies are inseparable. Many admit blockchain will play a key role in diverse sectors such as logistics, security and real estate. We are paying attention to the potential of its use.”
In the meantime, the financial regulator has launched a team to monitor virtual currency transactions and detect illegal activities using cryptocurrencies, such as money laundering and tax evasion.
According to sources in the Financial Services Commission (FSC), the Korea Financial Intelligence Unit (FIU) under the FSC organized a team to examine suspicious virtual currency trading following reports by banks.
Under the guidelines set to be applied next week, the country’s six major banks must report suspicious transactions to the FIU to deter money laundering using cryptocurrencies.
For instance, deposits or withdrawals through virtual currency exchanges that exceed 10 million won a day or 20 million won a week, or frequent trading such as five times a day or seven times a week will be regarded as suspicious.
Cryptocurrency transactions by corporations or organizations are also to be considered suspect according to the guidelines. Banks should report any such cases to the FIU.
The new division at the FIU will be in charge of examining and analyzing those transactions. After the analysis, it will transfer any tax evasion information to the tax agency while reporting information on illegally accumulated assets to the prosecution.
The financial regulator also recommended financial companies to strengthen their monitoring on suspicious trading of virtual currencies.
The measures are based on the determination that cryptocurrencies can be an easy means of money laundering for criminals such as tax evaders and drug traders. For instance, the financial regulator recently found an individual with a criminal record of drug charges who recently had been abroad, having withdrawn billions of won from a virtual currency exchange account. The financial regulator suspects a payment for narcotics may have been made using virtual currencies.