Introduction of Education Tax on Cryptocurrency Exchanges
In South Korea, authorities are examining the introduction of an education tax applicable to cryptocurrency exchanges, following a possible change in their classification to that of financial institutions under the upcoming Digital Asset Basic Act. Major players in the crypto sector, including Upbit and Bithumb, may find themselves liable for taxes amounting to billions of won on an annual basis if this reclassification occurs.
Regulatory Discussions and Legislative Framework
As reported by Seoul Economic Daily on October 26, discussions have taken place between government officials and leaders of domestic crypto exchanges about this potential regulatory modification. The South Korean government is moving forward with legislation aiming to create a comprehensive framework for digital asset operations, which may necessitate the revision of current tax classifications and structures for these exchanges.
At present, cryptocurrency trading firms are classified as information and communication companies, and as such, they enjoy exemptions from the education tax imposed on traditional financial institutions such as banks, insurance companies, and securities firms. However, this could change if the Digital Asset Basic Act officially categorizes crypto exchanges as financial entities.
Implications of Reclassification
A senior official conveyed to industry stakeholders that if crypto exchanges are recognized as financial institutions, then they would indeed be subject to the same education tax obligations as existing financial firms. The classification of these exchanges has evolved since 2018 when they were initially not included in the financial sector regulations, highlighting the potential need for legislative updates as the government prepares its new directives.
The education tax in South Korea is set at a rate of 0.5% for operating revenues up to 1 trillion won, increasing to 1% for revenue exceeding that amount. This tax is calculated based on revenue rather than profits, meaning companies are liable for it even if they report losses. If the same policy is adopted for cryptocurrency exchanges, they would face tax obligations based solely on their income from operations, irrespective of their overall profitability after expenses.
Projected Tax Liabilities
Current data suggests that the five largest crypto exchanges in South Korea, as defined by their operating revenues, generated substantial figures in 2025. Dunamu, running Upbit, reported an impressive 1.5212 trillion won, while Bithumb followed with about 651.3 billion won. Other exchanges like Coinone, DigitalX, and Gopax generated respective revenues of 45.4 billion won, 9.7 billion won, and 4.3 billion won. Based on the present tax rates, Dunamu could be liable for around 10.2 billion won annually, while Bithumb could face a tax of approximately 3.2 billion won. These projections are contingent on the assumption that the education tax would apply to their taxable revenue, along with any potential exemptions regarding trading fees.
Legislative Progress and Future Considerations
Alongside these discussions, regulators are approaching the completion of the second stage of cryptocurrency legislation, as Financial Services Commission Chairman Lee Eog-weon indicated in a meeting with lawmakers on October 22. However, a formal announcement regarding the legislation’s submission date has not yet been made, with several aspects regarding supervisory mechanisms for cryptocurrency exchanges and the issuance of stablecoins still under deliberation.
In a related context, South Korea is contemplating the postponement of its long-planned tax on digital asset investment returns, which is set to impose a 22% tax on annual gains exceeding 2.5 million won starting January 1, 2027. There are discussions within the presidential office and ruling party, favoring a deferral until 2029 due to concerns about adequate preparation and the challenge of tracking overseas transactions.
Conclusion
It is important to note that the proposed education tax differs from the tax on investment gains as it targets the operating revenues of crypto exchanges, rather than profits from individual investors. Meanwhile, the National Tax Service is preparing guidance on the current investor tax, which is slated for release in November, aiming to clarify taxation on various income streams from the cryptocurrency realm such as staking rewards and decentralized finance transactions, areas that require clearer regulatory frameworks ahead of implementation.
