South Korean-based crypto exchange Bithumb has won its case against the country's tax regulator, the National Tax Service (NTS), marking a significant legal triumph for the exchange. The Seoul High Court presided over by Judges Kim Jung-ho, Lee Seung-han, and Shim Jun-bo, pronounced the ruling that exculpated the exchange in an appeal hearing on August 22.
To clarify, the judges ruled that virtual assets held in Bithumb Korea's platform do not qualify as inventory. According to the local press, "...since Bithumb conducts a business method of obtaining brokerage fees from virtual asset transactions between members, the virtual assets it holds cannot be viewed as inventory assets," said the court.
Conflict Origin with Bithumb Korea
The conflict between Bithumb Korea and the country's tax regulators began when the exchange altered its method of evaluating virtual assets from 2014 to 2017. Following the modification, the authorities slammed the exchange with a 180 million Won corporate tax for "underreported profits.” However, appeal efforts from the exchange slashed the fine to 130 million Won
Resolution
Meanwhile, March 2024 saw the first court hearing, which ruled the corporate tax as legal, stating that "...there was no special reason for the change in the valuation method." Additionally, it highlighted Bithumb's neglect to report the alteration to the authorities.
In contrast, the recent trial at Seoul High Court acquitted the exchange on two grounds. The first was the absence of regulations on reporting procedures in 2017. Therefore, the exchange was free to change to whichever method for asset valuation it pleased at the time.
The next was that Bithumb's assets were not deemed inventory assets because of its unique business methods. In summary, the court ruling and landmark victory for Bithumb redefines virtual assets tax policies in South Korea, benefiting several exchange operators. However, South Korea will continue to comb the crypto landscape in search of new policies amidst a regulatory overhaul.