South Korea’s National Tax Service is set to complete an “Integrated Cryptocurrency Management System” by 2025, aiming to improve tax compliance and prevent illegal activities.
South Korea’s National Tax Service (NTS) has taken significant step forward by initiating the development of an “Integrated Cryptocurrency Management System”. Aimed at strengthening tax compliance and combating tax evasion, the system is scheduled to be completed in 2025.
The move comes at a time when bitcoin and other cryptocurrencies have seen a resurgence of market interest, with bitcoin hitting a record high of $69,000 in November 2021. Investments in cryptocurrencies have surged, particularly following the approval of a bitcoin spot ETF in the United States, fueling a rapid rise in cryptocurrency investment.
To address the regulatory challenges posed by the anonymity and decentralization inherent in cryptocurrency transactions, NTS selected GtiC as the lead consultant for the preliminary phase of system construction. The system will analyze and manage transaction information collected under the mandate, which requires virtual asset service providers to report details of their transactions.
The push for a comprehensive system to monitor virtual asset transactions is driven by the growing prevalence of money laundering, unconventional inheritance and gift transfers, and offshore tax evasion related to cryptocurrency transactions. Although virtual asset service providers were required to report transaction data following amendments to the Corporate Taxation Act and the Income Tax Act, an adequate system to analyze and manage this information was lacking.
By establishing an “Integrated Cryptocurrency Management System”, NTS aims to prevent tax evasion using cryptocurrencies and ensure fair taxation. This initiative is in line with the global trend of increasing regulatory control over virtual assets. According to a PwC report, the European Union is in the process of establishing market regulations for virtual assets, and the United States has introduced new tax reporting requirements for cryptocurrencies. These regulatory efforts are based on recommendations from the Financial Action Task Force (FATF) and aim to maintain transparency and order in financial markets, prevent crime and abuse, and protect investors.
The NTS system is expected to increase the transparency of cryptocurrency transactions, helping to prevent tax evasion and realize fair taxation. As the world increasingly moves towards a regulated cryptocurrency environment, South Korea’s proactive steps in this direction are a notable development in the global financial landscape.
The news that South Korea’s tax authority is developing an “Integrated Cryptocurrency Management System” is evidence of the country’s commitment to adapting to the evolving financial ecosystem and maintaining compliance with international standards.
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