Another city announces the confiscation of cryptocurrencies of tax debtors in South Korea

What’s new? Authorities in the South Korean city of Phaju will begin confiscating and selling crypto assets of local residents to pay taxes. Currently, notices have been sent to 17 citizens with debts totaling 124 million Korean won ($88 600). Their cryptocurrencies stored on exchanges will be confiscated and sold if the debts are not paid by the end of November. Authorities emphasize that citizens will not be able to use cryptocurrencies to hide assets.

Material by Yonhap

What else is known? Journalists of the local edition of Yonhap note that cryptocurrencies have become a popular means of tax evasion in South Korea. Officials also explained the decision to withdraw crypto assets from exchanges by the fact that citizens intentionally transfer funds into digital assets to avoid paying taxes, despite the availability of funds for payment.

Moreover, this is not the first time the city has seized the cryptocurrencies of debtors. On July 29, the local tax office seized crypto assets worth 100 million Korean won ($72 000) belonging to tax evaders.

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In April this year, authorities in the city of Pohang also announced the confiscation of cryptocurrencies from citizens with tax debts of more than 500 000 Korean won ($358). The innovation affected users of centralized exchanges (CEXs) Bithumb, Upbit, Korbit, and Coinone.

Debtors will first face an account freeze, but if debts are not paid even after that, their cryptocurrencies will be sold on the open market.

The Gyeonggi Provincial Tax Justice Department previously introduced a digital system to track debtors’ cryptocurrency accounts, which helped it recover 6,2 billion Korean won ($4,4 million) in undeclared taxes for 2023 by the end of February.

Before the introduction of the system, the tax authorities had to request information from the exchanges on each individual case, and the consideration of applications could take several months. With the introduction of the system, the process became massive and was reduced to about two weeks.

In late October, South Korea’s Ministry of Finance announced amendments to a number of laws that will oblige exchanges to transfer data on all cross-border transactions to tax, customs, and financial local and global regulators. According to officials, this is necessary for detecting illegal transactions as well as research purposes.

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As for the experience of other countries, in October, South African authorities began requesting crypto exchanges to collect tax information about their users. Those whose scrutiny has not yet been initiated were urged to voluntarily disclose their assets.

In the same month, Kenya announced a real-time crypto transaction monitoring system to improve tax collection efficiency.

In Japan, the leader of the Democratic Party for the People (DPP) Yuichiro Tamaki promised to reduce the tax on crypto profits to 20% if re-elected. In the state of Detroit, local residents will be ableto pay local taxes with cryptocurrency from 2025.