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Korean blockchain lobby calls for crypto tax plan to be put on ice

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The Korea Blockchain Association has called for the government’s new 20% crypto trading tax plan to be delayed for another two years.

According to an Oct. 14 report from News1 Korea, the Korea Blockchain Association, or KBA, is requesting regulators postpone the South Korean government’s implementation of its long awaited new tax strategy until Jan. 1, 2023.

The KBA doesn’t explicitly state it is against the 20% tax rate but said that crypto exchanges and companies in the industry need a “reasonable period” to prepare for the Income Tax Act.

One of KBA’s reasons for the delay is due to a short window between regulations applying to the old tax scheme and the start of the new one. Crypto exchanges would be allowed to report on trades falling under the previous tax code until the end of September 2021. But the KBA is arguing that since Korea’s Ministry of Economy and Finance set the revised code to be enforced starting on Oct. 1, 2021, it would be difficult to comply with the new regulations in potentially less than 24 hours. 

Korea Blockchain Association chairman Oh Gap-soo implied that as this was the first time the government had gotten involved in taxing digital assets, a temporary suspension of the tax code might be necessary. Regulators might not immediately accept reports from crypto firms, leading to uncertainty as to whether they can continue to operate in October.

“The industry is having a great deal of difficulty in preparing for taxation because it is not equipped with a tax infrastructure in a situation where it is uncertain whether or not the business will continue ahead of the enforcement of the Special Payment Law.”

He added that: “It is necessary to provide a reasonable minimum period of preparation so that it can contribute to the national economy and to secure tax revenue in the long term.”

Under the new tax plan, gains made from virtual currencies and intangible assets will be classified as taxable income, calculated annually. Income from virtual assets below $2,000 per year falls below the minimum threshold and will not be taxed. Any income generated from cryptocurrency trading above this threshold, however, will be taxed at a set rate of 20%.

Modifications to existing tax law are likely to impact many businesses across the country. Recently, four of the five top banks in Korea announced they would be introducing “crypto-asset services.” In addition, at least one exchange is partnering with a major bank for fiat to crypto trading.

“The industry is in line with the principle to tax income from virtual assets and will actively cooperate,” a representative for the KBA stated.



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Philippines’ central bank isn’t ready to pull the trigger on a CBDC

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Philippine central bank governor Benjamin Diokno has announced that the institution’s “exploratory” study of central bank digital currency study suggests that much more work is needed to make a digital peso a reality.

During the summer, Bangko Sentral ng Pilipinas had confirmed it was investigating the feasibility and potential policy implications of issuing its own CBDC, or digital counterpart to the physical peso.

In a press briefing, Diokno reportedly rejected the possibility that a CBDC could be issued any time in the near future. The study so far has suggested that ongoing research is needed to look into capacity-building and the creating of networks between other central banks and financial institutions. 

So far, the bank’s study has covered basic issues surrounding CBDCs, focusing on implications for monetary policy, legal frameworks, payments and settlement systems, financial inclusion, and regulatory oversight.

The governor has said that CBDC research at the BSP could benefit from a study of the business models of private-sector digital currencies in the Philippines, as well as the use of industry sandboxes. The central bank plans to look into how to improve the country’s existing payment system and to draw upon other central banks’ CBDC research worldwide.

CBDC research in the Philippines has emerged against the backdrop of the central bank’s Digital Payments Transformation Roadmap, which aims to switch over 50% of retail payments into digital form by 2023, and to ensure that 70% of citizens have a bank account by the end of the period.

Ongoing CBDC research could require technical input from the International Monetary Fund and Bank of International Settlements, in the BSP’s view. 

The central bank remains committed to the view that CBDCs are superior to private digital currencies, and has indicated that its digital innovations will continue to evolve within the existing structure of fiat currencies. 



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Russian officials must now declare crypto holdings

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Russia’s public officials will be mandated to declare all private crypto assets holdings from New Year’s Day, 2021.

The requirements were announced on Oct. 20 by the office of Russian prosecutor general, Igor Krasnov, following a meeting with 15 fellow prosecutor generals representing member states of the Shanghai Cooperation Organization (SCO).

“Starting next year, civil servants will be required to declare [virtual] currencies on an equal basis with other assets,” Krasnov said.

In 2018, Russia’s labor ministry announced that public officials would not need to declare virtual asset holdings in their tax reports due to the unregulated status of crypto. As such, concerns have lingered that crypto assets may be the financial instrument of choice for bribery and corruptions

Over the past three years, the Prosecutor General’s Office claims to have confiscated more than $440 million worth of undisclosed, non-crypto assets from public officials.

The new requirements follow new laws signed by President Vladimir Putin in July that will classify crypto assets as akin to physical commodities from 2021 — recognizing virtual currencies in the country for the first time.

While the laws do not recognize cryptocurrencies as legal tender, they will legitimize crypto-related activities across Russia.

Alongside SCO member states Russia, India, Kazakhstan, China, Kyrgyzstan, Pakistan, Uzbekistan, and Tajikistan, the prosecutor generals of Afghanistan, Belarus, Mongolia, Iran, Azerbaijan, Cambodia, and Armenia — which are non-member partners and observer states to the SCO — were also present at the meeting. The gathering centered on the topic of combating corruption.

The Russian announcement on crypto reporting suggests similar laws may soon be enacted across the Eurasian region.

In August, Russia’s Federal Financial Monitoring Service claimed it had developed a way to “partially” de-anonymize transactions using Bitcoin (BTC), Ethereum (ETH) and the popular privacy coin Monero (XMR). The agency also noted that several “overseas countries have also shown interest in the system,” suggesting it is looking to sell the system to allied nations.



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US crypto derivatives merchants need to leave customer funds alone, says CFTC

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Per guidance released Wednesday evening, the Commodity Futures Trading Commission (CFTC) is advising businesses trading in crypto derivatives to hold customer funds very carefully.

The new guidance continues the CFTC’s interest in carving out rules for custodianship of virtual currencies — an area obviously distinct from any other asset class. Per the commission: 

“Custodians of virtual currencies are typically not subject to a system of comprehensive federal or state regulation and oversight, which includes safeguarding of these novel assets, and this raises potential risks to the protection of customer funds held at such custodians.”

The specific provisions of the guidance limit the locations that a “futures commission merchant” (FCM) can deposit customer virtual currency at to “a bank, trust company, or another FCM, or with a clearing organization that clears virtual currency futures.”

Moreover, the CFTC warns FCMs that they need to keep any such deposits in accounts clearly marked as customer funds, and will not allow gains in one account to make up for losses in another.

Effectively, the guidance seems most determined that customer crypto funds remain safe and untouched, barring FCMs from trading such funds in order to make collective gains. How big of a problem FCM trading of crypto deposits has shown itself to be goes unaddressed, but you can certainly imagine some catastrophic results of a crypto futures dealer deciding to play some volatile markets using crypto funds.

The CFTC has been busy trying to assemble a holistic framework for crypto assets. At the beginning of this month, the commission promised to protect the “burgeoning market” for these assets, an announcement that came immediately after the announcement of their pursuit of BitMEX for operating an unregistered derivatives exchange in the U.S. 



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