South Korea Escalates Crypto Tax Regulation: Government Plans to Use AI to Track Wallets and Combat Tax Evasion

On March 13, news reports indicate that as South Korea prepares to officially implement its cryptocurrency tax system, local tax authorities are accelerating the development of digital asset regulation tools. The Korea National Tax Service (NTS) has invited multiple tech companies to bid, planning to develop an analytical platform to monitor crypto wallets and trading activities to strengthen tax management on crypto asset gains.

According to South Korean media, the project budget is approximately $2 million. The NTS aims to leverage artificial intelligence and blockchain data analysis technologies to review transaction data from major compliant domestic crypto trading platforms, identifying potential tax evasion patterns. Once the system is operational, tax authorities will be able to analyze investors’ trading behaviors more efficiently and identify potential unreported income.

Currently, South Korea does not tax individual crypto trading gains, but this will change in the future. Under existing laws, starting January 1, 2027, crypto investment income for residents will be included in the personal income tax system. The new regulations require individuals to pay taxes on gains exceeding a certain threshold, including a 20% income tax plus surcharges. Failure to report earnings properly may result in back taxes and hefty fines.

In addition to analyzing transaction data, the new system will support monitoring residents’ P2P trading activities and crypto derivatives investment income. Tax authorities believe these types of transactions are often difficult to detect with traditional regulatory systems, thus requiring more advanced data analysis tools for identification.

According to the plan, the NTS will select a technology contractor by April 14, and will have about eight months to complete the system development. The project is expected to enter testing in November and go live in December, providing technical support for the future implementation of the crypto asset tax system.

South Korea’s crypto tax policy has long been a political battleground. The parliament passed related tax laws as early as 2020, but implementation has been delayed three times due to pressure from the crypto community and young investors. Currently, some lawmakers are still debating whether to include airdrop rewards and staking earnings within taxable scope. Analysts believe that as regulatory infrastructure improves, the South Korean government may further strengthen enforcement of crypto asset taxation.