South Korea's planned tax on virtual-asset income, set to take effect in January, is fueling concerns that domestic investors may shift more trading and assets overseas. A private-sector estimate puts the value of digital assets moved from Korean exchanges to offshore platforms and personal wallets at roughly 700 trillion KRW over the past five years, including this year's projected outflows.
According to the National Assembly's public petition portal, more than 21,800 people had signed a petition, posted on Aug. 21, calling for a two-year delay to crypto taxation as of Aug. 31. The petitioner argued that the government should first strengthen the tax framework, reporting infrastructure and industry regulations before enforcing the new regime.
Under the current Income Tax Act, income earned from transferring or lending virtual assets will be classified as separately taxed miscellaneous income from Jan. 1, 2027. Investors will aggregate annual gains and losses, deduct 2.5 million KRW, and pay a 20% tax on the remaining amount. Including local income tax, the effective rate is 22%. Income earned in 2027 will first be reported and paid in May 2028.
Korea's crypto market is already experiencing a sharp drop in trading activity ahead of the tax rollout. According to CoinGecko, average daily trading volume across the country's five major exchanges—Upbit, Bithumb, Coinone, Korbit and Gopax—stood at $632.12 million, or about 876 billion KRW, from Aug. 1 to 22. That was down 79% from the average daily volume of $3.011 billion recorded in February.
The decline also reflects a structural shift in trading. While Korean exchanges primarily offer spot trading, demand for leveraged products and perpetual futures has increasingly moved to offshore exchanges and decentralized exchanges, or DEXs.
Digital assets transferred from domestic exchanges to overseas platforms and personal wallets are also increasing. According to the Financial Intelligence Unit, outward transfers from Korean exchanges rose 6% in the second half of last year, from 101.6 trillion KRW in the first half to 107.3 trillion KRW. The full-year total reached 208.9 trillion KRW.
Tiger Research and Chainalysis, in a longer-term analysis of capital flows, estimated that virtual assets transferred overseas from Korean exchanges could total about 700 trillion KRW between 2021 and this year, including projected transfers for 2026.
Transactions conducted through overseas exchanges, decentralized exchanges and personal wallets make it more difficult to identify the beneficial owner, acquisition cost and realized gains or losses than transactions conducted on domestic exchanges. Moving assets offshore does not eliminate a Korean resident's tax obligation: the planned tax applies regardless of whether assets are held on a local exchange, foreign exchange or private wallet.
Still, such migration could make it harder for tax authorities to identify taxable income and could create gaps in investor protection. Critics warn of a potential paradox: if the tax regime accelerates an exodus from regulated Korean exchanges, it could weaken enforcement while shifting trading-fee revenue and business opportunities abroad.
Tax fairness is another major point of contention. Under the current framework, investors may net gains and losses incurred within the same tax year, but they cannot carry losses forward to offset gains in future years. The National Assembly Budget Office, in a recent commissioned study, proposed allowing virtual-asset transfer losses to be carried forward for up to five years and raising the current annual basic deduction of 2.5 million KRW.
The study also called for clearer rules on what constitutes taxable income and how acquisition costs should be calculated for specific transaction types, including staking rewards, lending income, airdrops and hard forks.
“Implementing taxation before clear standards are in place could accelerate the flight of investors to overseas platforms,” a virtual-asset industry official said. “The government should first establish the industry's legal foundation and a stronger investor-protection framework through the Digital Asset Basic Act, then discuss the tax system.”
