Digital currency encounters global regulatory wave: South Korea has also done it! Heavy blows against tax evasion using digital currency

Author: Ye Zhen Source: Wall Street Journal

South Korean regulators recently seized $47 million worth of Bitcoin, Ethereum and other cryptocurrency assets from 12,000 people accused of tax evasion. South Korean officials said that if the tax evaders do not voluntarily pay their overdue taxes, bankruptcy and liquidation procedures will be initiated for these digital assets.

Digital currencies are facing regulatory crackdowns around the world. South Korea has recently stepped up its efforts to crack down on tax evasion and tax avoidance using digital currencies.

Officials from the Gyeonggi Province government, which oversees the greater Seoul area, recently revealed that after a months-long investigation, more than 53 billion won (US$47 million) in Bitcoin, Ethereum and other cryptocurrency assets were confiscated from 12,000 people accused of tax evasion.

It was reported that this was "the largest cryptocurrency seizure in South Korean history for unpaid taxes" and that these digital assets were widely used to hide assets because local exchanges did not collect the resident registration numbers of account holders.

Among those seized was a “famous home shopping channel host” who owed 20 million won in taxes but held 500 million won worth of Ethereum and other cryptocurrencies; another owner of about 30 properties who owed 30 million won in income tax but held 1.1 billion won worth of cryptocurrency assets; and a doctor who owed 17 million won in overdue taxes but owned 2.8 billion won worth of Bitcoin.

South Korean officials said that if these "habitual and major tax evaders" do not voluntarily pay their overdue taxes, bankruptcy and liquidation procedures will be initiated for these digital assets.

Previously, the Financial Services Commission, a South Korean regulator, had issued an "ultimatum" to South Korean exchanges, requiring them to cooperate with local banks and open real-name accounts for customers. However, local banks refused to cooperate with dozens of smaller exchanges, fearing that they would be affected by money laundering and other financial crimes. The South Korean government is also developing plans to impose income taxes on cryptocurrency transactions.

Since the beginning of this year, Bitcoin and other digital assets have experienced huge fluctuations, presenting a "roller coaster" market. As regulatory pressure continues to increase, Bitcoin has plummeted from over $60,000 to below $30,000, wiping out all gains in the past year. As of press time, Bitcoin was trading at $33,650, up 3.37% on the day.

In a report released Wednesday, the Bank for International Settlements, known as the "bank of central banks," said digital tokens such as Bitcoin have little "redemption function" and are "contrary to the public interest."

The agency supports the digital currencies that central banks are working on developing, saying that these official digital currencies can be a tool to achieve greater financial inclusion and reduce high payment costs. In contrast, cryptocurrencies such as Bitcoin are "a speculative asset rather than money, and are often used to facilitate money laundering, ransomware attacks and other financial crimes."