The North Chungcheong provincial city of Cheongju in South Korea has revealed its ground-breaking aim to seize cryptocurrency holdings from local tax defaulters. In order to prevent tax evasion, the Cheongju government has joined forces with seven well-known South Korean cryptocurrency exchanges, including Upbit and Bithumb, to look into and seize the digital assets of thousands of people who owe at least 1 million won ($750) in local taxes.
This initiative follows a growing concern that cryptocurrencies are being employed as a means to conceal property and evade taxes in South Korea. As part of their efforts to ensure accountability, Cheongju authorities are taking action to reclaim owed taxes by seizing cryptocurrencies from those who have neglected their tax responsibilities.
In 2022, the Cheongju administration successfully collected overdue taxes from 17 individuals after reviewing the cryptocurrency holdings of around 16,000 crypto investors, amassing a total of 68 million won ($51,000). Tax-related cryptocurrency confiscations have been on the rise across South Korea in recent years. Combined figures from 2021 and 2022 revealed that the government seized up to 260 billion Korean won ($180 million) worth of cryptocurrencies from tax evaders.
The steps taken by Cheongju reflect a broader trend in South Korea and globally. As cryptocurrency adoption has grown, authorities are increasingly scrutinizing crypto assets to ensure proper taxation. South Korea’s government took a significant step in 2021 when it passed legislation allowing regulators to seize cryptocurrencies like Bitcoin from tax evaders.
However, the impact of such measures on investor confidence and the government’s efforts to foster a thriving crypto environment cannot be overlooked. Several incidents of tax evasion have recently captured the attention of South Korea’s National Tax Service (NTS). This, in turn, could influence their willingness to participate in the crypto market.
In January 2023, a special investigation was initiated on Bithumb Korea and Bithumb Holdings, both operating Bithumb, a prominent local cryptocurrency exchange. The investigation aimed to uncover tax evasion through domestic and international transactions, shedding light on potential irregularities in tax compliance.
Back in August 2022, a representative from the NTS highlighted concerns about tax evasion tactics involving virtual assets like cryptocurrency. The increasing trend of individuals attempting to evade taxes by investing in cryptocurrencies and shifting their wealth to tax havens raised alarms for the tax authorities. The representative emphasized that these actions hinder market justice and fair taxation, calling for measures to address this new form of tax evasion.
These incidents underscore the challenges faced by South Korea’s government in maintaining a balanced approach to regulating cryptocurrency, ensuring compliance, and promoting a conducive environment for crypto enthusiasts and businesses alike. As the nation navigates this evolving landscape, finding the right equilibrium will be essential for sustaining investor trust and fostering innovation.