South Korea’s tax agency intensifies its crypto crackdown, targeting hidden assets in cold wallets, seizing ₩146 billion, and tightening global enforcement.
South Korea’s National Tax Service (NTS) is intensifying its crypto tax crackdown significantly. The agency has issued a stern warning to investors. Even storage devices, which are called cold wallets and are used offline, may now be subject to search and seizure. This major change in policy is aimed at wealthy individuals storing digital assets. It represents a new age of tough enforcement.
Tracking Digital Fortunes: NTS Targets Hidden Off-Chain Assets
The NTS has advanced blockchain analysis tools. These programs will log everything on-chain concerning suspects. Consequently, the authorities can track funds even after their exit from central exchanges. This hi-tech surveillance plays a key role in asset recovery.
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The agency has been aggressively responding for the past four years. The NTS recovered and seized crypto assets in the amount of KRW146.1 billion. This initiative was aimed at 14,140 tax delinquents across the country. Indeed, this huge amount reveals the extent of past avoidance.
Virtual asset investment has been widespread recently. The number of investors has expanded almost tenfold. It leapt from 1.2 million five years back to 10.77 million this year. In addition, the daily trading volume increased to a high of ₩6.4 trillion. This explosive growth is accompanied by an increasing number of cases of tax abuse.
The pseudonymity of cryptocurrencies makes them hard to trace. It is more difficult than accounting for conventional assets such as bank deposits or shares. Therefore, the tax authorities are using dedicated monitoring programs. These tools are created to efficiently stop an attempt at asset hiding.
South Korea Boosts Crypto Tax Oversight with International Partnerships
Centralized exchanges are the starting point for the seizure. The National Tax Collection Act (NTCA) is the authority by which the NTS requests an account review. If coins are verified, the account is frozen by the exchange. Then the NTS takes over and sells the assets without delay.
The real problem lies in transferring coins to cold wallets. These are the offline storage media, which are usually a hard drive. In this case, hidden asset tracing is much more complicated. Coins on hard drives look physically like cash or gold bullion.
The new aggressive approach to enforcement was confirmed by an NTS official. They review the transaction history of a delinquent taxpayer thoroughly. If they suspect they are hiding online, they go in for a search and seizure of the home. This step is an essential step in the recovery of off-chain funds.
This problem is compounded if taxpayers use exchanges in foreign countries. The cases are international and therefore, domestic law does not apply. Thus, foreign governments’ cooperation is commonly sought. Korea is a part of a multilateral arrangement with 74 countries. This does not include large-scale markets such as the U.S., China, and Russia.
International tax authorities are becoming more coordinated. For instance, recently, a major probe was launched from India. It was aimed at 400 Binance traders accused of crypto tax evasion.
The amount of virtual assets exported from the country is high. This amount amounted to krw78.9 trillion for the first half of this year. All in all, South Korea’s new plan is an adaptation that is needed. Governments are shutting the last loopholes used by rich tax dodgers. This new cold wallet policy is a precedent for the world to follow.
