South Korea Unveils Bold Crypto Management System to Combat Tax Evasion

In a bid to curb tax evasion related to cryptocurrencies, South Korea is making arrangements to establish a specialized asset management system by 2025, according to reports from local media outlets.

The initiative, spearheaded by the country’s National Tax Service, has enlisted GTIC as the lead firm tasked with developing the system. This move comes as part of a preliminary consultation aimed at addressing the growing concerns surrounding tax evasion in the crypto space, as reported by Digital Daily on Monday.

Data Management for Effective Oversight

The envisioned system is designed to streamline the analysis and management of data collected from various crypto trading platforms. These platforms are mandated to submit users’ transaction details, enabling authorities to effectively monitor and regulate crypto-related transactions.

The move is not surprising given that South Korea is a member the Organization for Economic Cooperation and Development (OECD), which has implemented a cryptocurrency tax framework intending to enhance transparency regarding crypto transactions and their participants.

Preparation for Cryptocurrency Tax Implementation

One of the primary objectives of this initiative is to bolster the country’s regulatory framework ahead of the implementation of crypto gains tax, which is slated to come into effect in January 2025. Originally scheduled for January 1, 2023, the implementation of the tax was delayed to provide sufficient time for the development and implementation of robust regulatory measures.

The National Police Agency of South Korea had joined forces with the top five cryptocurrency exchanges (Upbit, Bithumb, Coinone, Korbit, and Gopax), along with the globally renowned digital asset service provider Binance, in a collaborative effort last year.

They aimed to explore a system facilitating real-time surveillance of wallet addresses and the ability to freeze funds. This aligns with its mission to also curb tax evasion in the second-largest crypto market.

South Korea’s Regulatory Ban on Crypto ETFs

In a related development, South Korea’s financial regulator recently reaffirmed its ban on financial institutions from introducing cryptocurrency exchange-traded funds (ETFs). This ban extends to local investors, who are prohibited from accessing spot crypto ETFs, while foreign crypto futures products remain accessible.

Despite the comprehensive efforts to fortify the regulatory landscape, the National Tax Service has yet to respond to inquiries seeking additional clarification on the matter, highlighting the ongoing efforts to enhance transparency and accountability in the crypto sector.