South Korea strengthens cryptocurrency tax collection, tax authorities can directly seize CEX and cold wallet assets
South Korean tax authorities are intensifying efforts to combat cryptocurrency tax evasion, even allowing direct confiscation of crypto assets stored in cold wallets.
According to a statement from the National Tax Service (NTS) on October 9, if taxpayers fail to pay their taxes on time, tax officials have the authority to seize the cryptocurrencies they hold, including those stored in offline 'cold wallets'.
This measure is not just talk; between 2021 and 2024, tax authorities have confiscated and sold approximately 146 billion won worth of cryptocurrencies from 14,140 delinquent taxpayers. In 2021 alone, 71 billion won was recovered through 5,741 cases.
Local governments are equally resolute in enforcement. Since 2021, Cheongju has confiscated about 1.5 billion won in cryptocurrency from 203 residents; while Gangnam District in Seoul has also recovered about 140 million won in taxes from a high-profile delinquent taxpayer this year.
It is reported that tax authorities have been able to track the flow of funds, associate accounts, and lock in the wallets of delinquent taxpayers by using blockchain analysis tools and electronic seizure systems. At the national level, cooperation with exchanges has also been strengthened to improve recovery efficiency.
In addition, some local municipal systems can match suspicious wallets with real-name accounts at exchanges. When delinquent taxpayers do not cooperate, tax officials can directly freeze or transfer assets.
However, direct confiscation of cold wallets still faces challenges in practical operation. Due to the need to obtain physical devices or private keys, judicial approval or taxpayer cooperation is usually required. In contrast, assets stored in domestic exchanges are easier to handle.
For cryptocurrency holders, this new regulation means they face greater tax compliance pressure. Tax authorities will first freeze the relevant accounts and request holders to voluntarily pay the taxes owed. If the holders still do not pay, tax authorities will liquidate the assets at market value to offset the debt.
Although officials state that they will notify before taking action, this initiative has already sparked widespread public discussion about the boundaries of law enforcement.
In addition, many investors are calling for the NTS to clarify the specific rules for tax officials when enforcing against private assets, to ensure transparency and fairness in the enforcement process.