South Korean Tax Agency Targets Crypto Cold Wallets for Unpaid Taxes

The South Korean National Tax Service (NTS) is taking a hardline stance against tax evasion, announcing that it will seize crypto cold wallets from individuals who fail to pay their tax bills. This marks a significant escalation in the country's efforts to regulate and tax the cryptocurrency sector.

The NTS has been actively tracking crypto transactions on domestic exchanges and has already initiated measures such as freezing wallets and liquidating crypto holdings to recover unpaid taxes. Now, the agency is focusing on individuals suspected of hiding their crypto assets offline in cold storage.

Key Takeaways

• Home Raids: The NTS is prepared to conduct searches at the homes of suspected tax evaders to locate and confiscate cold wallets.
• Tracking Capabilities: The agency claims it can monitor crypto transaction histories using advanced tracking programs.
• Overseas Exchanges Pose a Challenge: The NTS acknowledges difficulties in tracking and seizing crypto assets held on overseas exchanges due to jurisdictional limitations.
• Growing Trend of Using Foreign Exchanges: Data indicates a growing number of South Korean crypto traders are using foreign or decentralized platforms.
• Liquidations are Happening: Over the past four years, the NTS has seized and liquidated approximately $103 million worth of crypto assets from over 14,000 delinquent taxpayers.

While the NTS can readily seize crypto from wallets held on domestic exchanges by issuing "right to question and inspect" orders, assets held on foreign platforms present a hurdle. The reliance on international cooperation agreements, which do not include countries like the United States, China, or Russia, limits the agency's reach.

Despite these challenges, the NTS's actions signal a clear message: South Korea is serious about taxing crypto gains and will pursue all available means to collect unpaid taxes, even if it means physically seizing cold wallets from individuals' homes.