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Tax Fears? Anonymous Cryptocurrencies Dash, Zcash and Monero Surge in South Korea

Last Updated March 4, 2021 5:02 PM
Joseph Young
Last Updated March 4, 2021 5:02 PM

The prices of three leading anonymous and privacy-focused cryptocurrencies Dash, Monero, and Zcash have surged in South Korea, amidst local market’s concerns over the South Korean government’s plans to impose gains taxes on cryptocurrency investment.

Across Bithumb and Coinone, two of the largest cryptocurrency exchanges in the South Korean market, the prices of Dash, Monero, and Zcash have increased by 30 percent, 13 percent, and 23.4 percent respectively, with Dash demonstrating the largest daily gain.

On Bithumb alone, the combined daily trading volume of Dash, Monero, and Zcash surpassed $550 million, overtaking the daily trading volume of bitcoin on all of the South Korean cryptocurrency exchanges.

Market Fearing Cryptocurrency Taxation?

As CCN.com reported, on December 13, the South Korean government held an emergency meeting to discuss cryptocurrency regulations. On Friday, two days after the meeting, the South Korean government released four main regulatory frameworks which were:

  1. Prevent unaccredited investors from dealing with losses through highly volatile cryptocurrencies.
  2. Prevent strictly regulated cryptocurrency exchanges from operating as speculative platforms for unaccredited investors.
  3. Request banks and exchanges to ensure underaged investors and foreigners cannot open trading accounts on cryptocurrency exchanges.
  4. Temporarily suspend institutional investors and retail investors from investing in cryptocurrencies.

In addition to these four regulations, the South Korean government stated that it will consider taxing cryptocurrency investors because it fears a “speculative mania” forming in the short-term. The government noted that it will cooperate with cryptocurrency exchanges and establish a method of taxing capital gains from cryptocurrency trading.

Within a week since the official statement of the South Korean government was released, the demand for privacy-focused cryptocurrencies in the South Korean market has surged. Previously, the market demonstrated minor interests in Dash and Zcash.

This week, the price of the three leading anonymous cryptocurrencies outperformed every other cryptocurrency listed on South Korean cryptocurrency exchanges with the exception of Ripple.

While Bithumb representatives and Hong Kong-based exchange Gatecoin executive Thomas Glucksmann emphasized that the imposition of strict regulations by the South Korean government will be beneficial for the local cryptocurrency market, the market and investors within it are still concerned with the potential passage of a cryptocurrency trading tax policy.

“The regulations in Korea will not have a negative effect. Licensing brings certainty, which encourages already regulated entities … to get involved in addition to skeptical retail investors,” said  Glucksmann.

Bithumb shared a similar sentiment with Glucksmann, as it stated , ”A right set of regulations will rather nurture the (virtual currency) market, and we would welcome that.”

Benefit of Anonymous Cryptocurrencies

Strict Know Your Customer (KYC) and Anti-Money Laundering (AML) policies and systems employed by local cryptocurrency exchanges create a challenging ecosystem for investors to purchase any cryptocurrency without being identified and verified as cryptocurrency traders.

The authorities cannot trace Dash, Zcash, and Monero payments beyond the initial transaction processed on regulated exchanges. Hence, if an investor purchases any of the three anonymous cryptocurrency on Bithumb and sends it to a wallet, beyond the initial trade on Bithumb, the government cannot trace the payments to the investor.

Featured image from Shutterstock.