Monthly spending on crypto cards, which are used mainly to make payments with stablecoins, has topped $1 billion (about 1.32 trillion won) for the first time. Concerns are growing that the cards could become a loophole if South Korea enforces taxation on virtual assets, because tax authorities have difficulty tracing the transactions.
Combined spending at 29 crypto card issuers reached $1.01 billion last month, according to a third-quarter report on the virtual asset industry released on the 19th by crypto data provider CoinGecko. That is nearly triple the $398 million recorded in January, a gain achieved in eight months. Third-quarter spending totaled $2.63 billion, up about 58% from the previous quarter.
The pace of growth has accelerated recently. Quarterly spending rose 8.4% to $1.67 billion in the second quarter from $1.54 billion in the first quarter, then expanded by more than 50% in the third quarter. Payments made with crypto cards grew rapidly even as total stablecoin market capitalization rose just 0.6% in the third quarter. In South Korea, cumulative downloads of major crypto card apps reached about 38,000 between January last year and the end of July this year.
The wider use of crypto cards also presents a challenge for authorities preparing to tax virtual assets. If investment and payment both take place through overseas exchanges, personal wallets and crypto card platforms, no trading record may remain in South Korea at all. RedotPay has suspended issuing new cards to domestic users, but workarounds remain, including for existing subscribers.
Market participants note that even if taxes are imposed after the fact through audits, there are practical limits to verifying each of the countless small payments made on overseas platforms. "The market for crypto cards keeps growing, but identifying the tax base is not easy," an official in the virtual asset industry said. "For users of overseas crypto cards, there could be fairness issues in enforcing taxation."