South Korea Cracks Down: Tax Agency Eyes Crypto Cold Wallets

The South Korean National Tax Service (NTS) is intensifying its efforts to collect unpaid taxes from crypto holders. Their latest tactic? Threatening to seize crypto stored in cold wallets during home visits.

This move comes as the NTS acknowledges that many crypto users are utilizing self-custody solutions, storing their assets offline to avoid detection. While the agency can track on-chain transactions on domestic exchanges and freeze wallets, cracking down on offline storage presents a new challenge.

Key Takeaways:

• The South Korean NTS is targeting crypto cold wallets to collect unpaid taxes.
• They plan to conduct home searches to seize crypto assets.
• Enforcement becomes difficult with overseas exchanges due to jurisdictional limitations.

The agency admits difficulties in tracking assets held on overseas exchanges due to the limitations of domestic law. Although international agreements exist for tax cooperation, these do not extend to all countries, notably the United States, China, and Russia.

The NTS already employs methods to seize crypto on domestic exchanges, including issuing “right to question and inspect” orders, freezing wallets, and liquidating assets at market price if tax bills remain unpaid. In the past four years, they have seized and liquidated approximately $103 million worth of crypto from over 14,000 delinquent taxpayers.

Challenges and Concerns:

• Effectiveness against those using foreign or decentralized exchanges is limited.
• Raises privacy concerns about government access to personal property.
• Could drive more Korean crypto users to offshore platforms.

This aggressive approach highlights the growing tension between governments seeking tax revenue and the decentralized nature of cryptocurrency.