South Korea will hit cryptocurrency transactions with a 20% tax starting next year

• South Korea will start taxing at 20% capital gains on crypto transactions next year, according to Yonhap News Agency.
• The gains must be reported when people file general income taxes in May 2023.
• The country will continue a program that monitors and cracks down on illegal activities in the crypto market until September.

South Korea is moving forward with plans to impose a 20% income tax on capital gains from cryptocurrency transactions, according to a report on Friday.

Gains from crypto transactions starting next year will be classified as "miscellaneous income" and must be reported when filing for general income taxes in May 2023, Yonhap News Agency reported.

The government announced the plan following a discussion during a vice-ministerial interagency meeting.

About 60 domestic cryptocurrency trading companies were active in South Korea in late May, Yonhap reported, citing figures from the Financial Service Commission, or FSC, the agency that will oversee and regulate the virtual asset market. Meanwhile, the government's special campaign to monitor and clamp down on illegal activities surrounding the crypto market will be extended until September.

Friday's decision comes after FSC Chairman Eun Sung-soo said last month said the country's crypto exchanges could be shut down in September. At the time of comments, more than 200 crypto exchanges were running.

Officials have said they're aiming to stop illicit activities being funded with digital assets and last year South Korea made changes to its anti-money laundering and financial reporting laws to include cryptocurrencies. The government has also said cryptocurrencies carry more risk and are more speculative than other asset classes.

South Korea has had a booming crypto market in recent years, highlighted by the so-called "kimchi premium," or the difference between crypto asset prices on South Korean exchanges compared with foreign exchanges. The four largest crypto exchanges in South Korea are Upbit, Bithumb, Korbit and Coinone. Upbit's trade volume rose to $9.9 trillion shortly after midnight local time Saturday, according to CoinMarketCap.