[Planning] Cryptocurrency policy and government block chain business ‘At a glance’

◆ Taxation on virtual assets is deferred for one year… Effective from 2023

Opinions about the need to suspend the taxation of cryptocurrencies are popping up everywhere, and due to the controversy over the taxation system, the ruling and opposition parties have tentatively agreed to a bill to delay the taxation of virtual assets from 2022 to January 2023. On November 29, the Tax Subcommittee of the Planning and Finance Committee of the National Assembly held a ‘subcommittee’ on the previous day (28th) and agreed on the amendment to the Income Tax Act to defer taxation of virtual assets. An official from the opposition party of the committee said, “Through the so-called subcommittee the day before, the opposition and opposition parties agreed on the amendment to defer the taxation of virtual assets for one year.”

◆Expansion of the tax-free limit is withheld… Keep ‘Other Income’

The plan to increase the non-taxable limit from 2.5 million won to 50 million won by changing the income from trading virtual assets from ‘other income’ to ‘financial investment income’ was withheld from this so-called so-called. Previously, the ruling and opposition parties decided to levy a 20% tax on the transfer gains if the income from virtual asset transactions is ‘other income’ while handling the amendment to the Specific Financial Information Act (Special Provisions Act) last year, and if it is more than 2.5 million won per year. is to do

If you earn 10 million won in coins, you pay 1.65 million won in tax

From the point in time when cryptocurrency taxation is enforced, cryptocurrency income is classified as ‘other income’ and taxed. The tax on cryptocurrency investment income is calculated by multiplying the tax base calculated through ‘transfer price-(acquisition price + incidental cost)-basic deduction’ by the tax rate. The basic deduction amount is set at 2.5 million won, and the tax rate is set at 20%. 22% including local taxes. Transaction fees are recognized as incidental expenses. In other words, if your income for one year is less than the basic deduction of 2.5 million won, you do not have to pay tax. However, if the amount exceeds 2.5 million won, taxation will be applied on the difference excluding the amount of 2.5 million won.

For example, if you buy a coin worth 10 million won and sell it for 20 million won, subtract 2.5 million won from the 10 million won in transfer gains, the tax base will be 7.5 million won. Multiply this by the tax rate to get the calculation that you have to pay 1.65 million won in tax. The tax may be slightly lower if you take the incidental cost into account. The transfer/acquisition price is based on the actual transaction price.

Report and payment of income every May

Cryptocurrency-related tax is a method of reporting and paying investment income for the previous year from May 1 to 31 every year. The first declaration and payment of investment returns from January to December 2023 will be made in May 2024.

◆NFT is not a virtual asset, exempt from taxation

Deputy Prime Minister Hong, at the National Assembly Planning and Finance Committee audit held on October 6, asked “NFT is widely used in the culture and art world, and art and even the Hunminjeongeum Haerye copy are being sold. Are you ready for taxation?” asked, “NFT is not a virtual asset.” He added, “There is a request for inclusion, so whether or not it is included in the virtual asset category itself is controversial and is under review.” Also, regarding the issue of deferment of taxation of virtual assets, he said, “It is judged that it is difficult to do so in terms of legal stability or policy reliability to re-adjust or defer taxation of virtual assets. I drew a line.

Establishment of ‘Virtual Asset Inspection Division’ in FIU

On September 17, the Financial Services Commission established the Virtual Asset Inspection Division, a department in charge of cryptocurrency within the Financial Intelligence Unit (FIU), and appointed Lee Dong-wook, who was the head of the policy and public relations team in the spokesperson’s office, as the first manager of the virtual asset inspection department through personnel appointments. The Virtual Asset Inspection Division is organized directly under the FIU of the Financial Services Commission. As a result, the FIU has been expanded to a system of 83 people in 7 divisions and a system operation planning officer under the director. The Virtual Asset Inspection Division, which consists of nine working-level personnel, is an organization that will operate temporarily until September 2023 to be in charge of managing and supervising virtual asset business operators, improving systems, and preventing money laundering. ▲Receipt/renew/cancellation of reports of virtual asset business operators ▲Supervise/inspection related to prevention of money laundering activities ▲Promotion of system improvement to protect users.

The travel rule must be established by the end of March 2022.

The Travel Rule is to go through the process of confirming the sender/receiver information between virtual asset providers (VASPs) when sending and receiving virtual assets. In the event of a crime such as money laundering, the exchange where the virtual asset transaction occurred collects and stores the virtual asset transmission history and sender/receiver information so that it can be provided to investigative agencies. Simply put, when funds are transferred in the financial system, the intermediary must have the identity information of both the sender and the recipient. Last year, the government specified travel rules as an obligation for virtual asset business operators to abide by the amendments to the Special Act on the recommendation of the International Anti-Money Laundering Organization (FATF).

According to the law, virtual asset providers (VASPs) must establish a travel rule (money movement rule) system by the end of this year at the earliest or March of next year (2022) at the latest. However, the industry’s assessment is that it is not easy to establish a travel rule. The fact that there are no guidelines on how to establish a system related to virtual asset transfer between exchanges that exist in many domestic exchanges has not been made, and there is no representative influential association to lead them. Accordingly, the business report was implemented with the deadline on September 24, six months after the enforcement of the special payment law, but it is analyzed that the enforcement of the travel rule will give an additional grace period of six months until March 2022.

Cryptocurrency exchanges ban self-coin handling

Virtual asset providers, such as cryptocurrency exchanges, will no longer be able to trade in cryptocurrency issued by themselves. Employees are also not allowed to trade virtual assets on their affiliated exchanges. This is a measure to prevent conflicts of interest to prevent damage to users that may occur due to market price adjustments by virtual asset operators, etc. and to increase the transparency of virtual asset transactions. On September 28, the Financial Services Commission announced that the amendment to the Enforcement Decree of the Specific Financial Information Act had passed the Cabinet Meeting. Amendments to the Enforcement Decree shall take effect immediately from the date of promulgation.

In accordance with the Enforcement Decree, the transaction of virtual assets issued by the virtual asset operator and a related person stipulated by the Commercial Act is restricted. However, in the case of virtual assets that have already been issued, a grace period of six months has been granted. However, exceptions will be allowed when it is necessary to exchange virtual assets acquired from non-residents in KRW for withholding tax on domestic source income of non-residents, or when it is necessary to pay a transfer fee, which is a block chain usage fee, in virtual assets. did.

◆Official virtual asset business operator, implementation of customer verification system

As the ‘Act on the Reporting and Use of Specific Financial Transaction Information (Special Act)’ came into effect, major virtual asset exchanges started a new ‘Customer Confirmation System (KYC)’ procedure. In fact, the customer transaction process has become more complicated as it has secured the status of an institutional financial company. Major domestic virtual asset exchanges that have completed the application of virtual asset business operators must implement the customer verification system.

According to the industry, in the case of ‘big 4 virtual asset’ exchanges △Upbit △Bithumb △Coinone △Korbit, mobile phone authentication, basic information input, authentication through ID photographing, and account authentication in the person’s name are commonly applied. Upbit applied preferentially to members with a one-time transaction amount of 1 million won or more, and applied later to customers with less than 1 million won. For Bithumb, additional conditions such as customer confirmation after changing individual membership for corporate members, face-to-face authentication with overseas customers are required for Coinone, and foreign currency deposits and withdrawals for Korbit are additionally applied.

The government invests 2.6 trillion won in key promising fields such as metaverse and blockchain

The Ministry of Science and ICT held the 12th Digital New Deal Meeting presided over by Minister Lim Hye-sook on September 15th. The meeting was held in Metaverse and attended by the Minister of Science and ICT as the class leader, officials from 18 government agencies, and heads of related institutions.

The government will invest 2.6 trillion won in key promising fields such as metaverse and blockchain by 2025 to ‘nurture new hyper-connected industries’. With policy support tailored to the characteristics of each area, it plans to focus on creating an environment such as ▲creating new market demand ▲expansion of the industrial base ▲technical innovation to close the gap with leading countries and ▲regulating the legal system for the expansion of new industries. In addition, to create new demand, large projects such as extended reality (XR), block chain, and Internet of Things (IoT) will be promoted in major public and private sectors such as manufacturing, medical care, and education, and the public sector will prioritize the use of private cloud.

Bank of Korea to publish CBDC comprehensive report next year

The Bank of Korea completed the central bank digital currency (CBDC) simulation in June next year, and decided to publish a CBDC comprehensive report in the same year. In the opening remarks of the ‘2021 Payment and Settlement System Conference’ held on November 18, Bae Jun-seok, Deputy Governor of the Bank of Korea, said, “The Bank of Korea has been conducting CBDC-related research since 2017, and completed consulting to secure a technological foundation around March of this year.” Starting in August, based on the consulting results, we are aiming to complete a CBDC simulation experiment in June next year to verify the technical implementation possibilities of basic functions such as issuance, distribution, and redemption of CBDCs and extended functions such as offline payment.”

He continued, “At the same time, we plan to publish a CBDC comprehensive report within next year after completing the study on the effects of the issuance of CBDC on the Bank of Korea’s responsibilities such as monetary policy, financial stability, and issuance. “We will continue to carry out follow-up preparations, such as designing a CBDC model and operating structure suitable for this, and additional technology experiments,” he said.

<Ministry of Science and Technology Information and Communication Announces 15 Tasks for Blockchain Pilot Project>

The Ministry of Science and Technology selected 15 blockchain pilot projects to spread blockchain technology and apply it to real life, and announced it on May 27th. The pilot projects are promoted as part of the ‘Digital New Deal Comprehensive Plan’ and the ‘blockchain technology diffusion strategy’. is divided into

Leading pilot projects (9 projects)

– Social safety housing

1. Vessel inspection management platform: In order to prevent marine accidents between vessels in advance, a blockchain platform is established in which the ship’s wireless facility permit/inspection agency and the ship hull inspection agency share the ship inspection results. The host company is ICONLOOP.

2. Block chain-based dangerous structure safety diagnosis platform: Establish a dangerous structure safety diagnosis platform that secures the reliability of the tilt and vibration data of dangerous structures with an IoT sensor with distributed identification (DID) of things. The host company is City Labs, and participating companies are Ginosis, Disaster Prevention Testing & Research Institute, and Think Generation.

– ID

3. Blockchain-based non-face-to-face identity verification and payment platform: Establish a payment platform that enables prepaid charging and point exchange through blockchain-based non-face-to-face identity verification. The host company is Coinplug, and participating companies are Galaxy Armory Tree and CU Box.

4. Blockchain-based non-face-to-face national pension entitlement confirmation system: When submitting documents to confirm entitlement to national pension for overseas beneficiaries of the national pension, using blockchain, distributed identification (DID), FIDO, and facial recognition technology Establish a system that allows convenient submission of evidence without documents. The host company is Dream Security, and the participating companies are Samsung SDS and Sysgene.

5. Seafarer qualification service using blockchain-based distributed identity identification (DID): Establish a service that issues seafarer qualification certificates issued by direct visits by seafarers through blockchain-based non-face-to-face identification. The host company is EdNet, and the participating companies are Coinplug, H&FinCore, and Korea Testing and Research Institute for Chemical Convergence.

6. Electronic wallet service for improving the welfare of military personnel: By establishing a blockchain-based mobile electronic wallet service for military service compulsory service, 28 types of military service related electronic documents such as military service certificate are issued from the mobile electronic wallet. Through this, the plan is to provide online financial welfare services and implement a paperless administration. The host company is Raon Secure, and the participating companies are Raon Story and Kobien.

– Logistics distribution

7. Blockchain-based import/export and inland transport platform: Various parties (shippers, forwarders, transport companies, CFS, transport drivers, etc.) and blockchain-based real-time sharing platform. The host company is Korea Trade Information and Communication.

8. Establishment of blockchain-based medical narcotics management platform: Build a platform that manages medical narcotics with blockchain to enhance business transparency and streamline the management system. The host company is OpsM, and the participating company is BDGen.

– Sharing economy

9. Blockchain-based video content distribution platform for continuous creative activities of artists: Based on blockchain, we build a distribution platform that transparently manages video content copyrights to help artists continue their creative activities. The host company is KT and Gyeonggi Art Center.

◆DID intensive business (2)

10. Distributed Identity Identification (DID) intensive construction project across the entire online and offline linked service (O2O) ecosystem for order delivery: DID is used to verify the identity of online and offline participants such as orderers, deliverers, and franchisees. The host company is Coinplug, and the participating company is Dillion Group.

11. Distributed ID (DID) shareholder identification-based non-face-to-face e-shareholder meeting system development: Develop an e-shareholder meeting system for the purpose of strengthening the exercise of voting rights by inducing marginalized minority shareholders to participate in the shareholders’ meeting by expanding the non-face-to-face general shareholders’ meeting. The host company is Korea Electronic Voting, and the participating company is Koscom.

◆Special Zone Linked Projects (4)

12. Blockchain-based movie investment management tool and peer-to-peer (P2P) streaming service: This is a service that integrates the film production and distribution process (funding, production, payment, and publicity) into a blockchain platform to create user profits and create consumer-driven content. . The host company is Barunson, and the participating company is Way2Bit.

13. Blockchain-based apartment integrated management platform: We build a management platform that provides real-time information such as money execution and management of apartment houses, accounting monitoring, etc. The host company is Sejeong I&C, and the participating companies are BK Winner and Dongseo C&I.

14. Distributed ID (DID)-based consumer-customized mobile transportation card issuance and unmanned convenience store access service: It is possible to reduce card issuance cost and identification time by demonstrating transportation welfare platform through customized transportation card issuance and developing DID-based unmanned convenience store access service. Build services that make it possible The host company is Coinplug, and the participating company is EB Card.

15. Biopharmaceutical (vaccine) exclusive smart cold chain platform construction and application business: Vaccine distribution and logistics information, supply, supply, warehousing, distribution, and inventory status are tracked, controlled, and analyzed in real time through blockchain to ensure vaccine quality and public trust Build a platform that restores The hosting companies are Hanjin and BPN Solution.

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