Gaps in South Korea's tax infrastructure are surfacing one after another ahead of the start of cryptocurrency taxation in January. The scale of domestic payments made with overseas crypto cards remains unknown, and the National Tax Service has acknowledged limits to obtaining information on offshore transactions. With blind spots raising questions of fairness, some are calling for the start date to be pushed back and institutional gaps to be addressed first.
Lim Kwang-hyun, commissioner of the National Tax Service, said on the 13th at a parliamentary audit by the National Assembly's Finance and Economic Planning Committee that the agency is "preparing to carry this out without disruption." He acknowledged practical limits, however, in areas that are hard to trace, such as transfers between private wallets, saying that "countries that have already begun taxing face the same difficulties."
Even with the Crypto-Asset Reporting Framework (CARF) for the automatic exchange of digital asset transaction information between countries, he said, capturing every transaction will be difficult. "Because this is such a new area, it is a challenge shared not only by Korea but by tax authorities around the world," Lim said. "It seems to be a problem that time will have to solve."
A parliamentary audit of the Bank of Korea the previous day also exposed gaps in tracking overseas cryptocurrency transactions. Rep. Kim Nam-joon of the Democratic Party of Korea raised the issue that the Bank of Korea and the Financial Services Commission have failed to properly grasp how widely overseas crypto cards are used domestically. He said he had requested relevant statistics from the central bank but was told they would be difficult to provide because there is no legal basis for collecting the data.
Crypto cards are a service that converts cryptocurrency held on overseas platforms into fiat currency at the time of payment. They allow holders to use cryptocurrency to buy goods and services without going through a domestic exchange. The government plans to tax gains realized from disposing of cryptocurrency in such payments, but it remains unclear whether actual transaction records and acquisition costs can be accurately verified.
From January last year through the end of July this year, cumulative domestic downloads of major crypto card apps totaled about 38,000. One cryptocurrency investor said: "When they cannot even grasp how much crypto cards are used in Korea, I don't understand how they intend to verify the acquisition cost and actual gains or losses on cryptocurrency that has moved back and forth between overseas exchanges and private wallets."
Even domestic exchanges have been slow to prepare for the tax. According to data obtained by the office of Rep. Park Soo-young of the People Power Party, as of last month Upbit's tax system was still in the preparatory stage of construction, while Bithumb had not even begun development work. ▷See page 2 of this newspaper's Sept. 14 edition