Regulatory gaps are surfacing in several areas ahead of South Korea's planned taxation of virtual assets next year. The domestic payment volume of crypto cards has yet to be measured, and the National Tax Service says it needs more time to secure overseas tax data. Calls are spreading in the market to delay the start of taxation and overhaul the system first.
National Tax Service Commissioner Lim Kwang-hyun said at a parliamentary audit by the National Assembly's Finance and Economic Planning Committee on the 13th that the agency is "preparing to carry this out without disruption" when coin taxation takes effect in January. But he also acknowledged that "it is true that countries that do tax these assets also face difficulties with parts that are hard to detect, such as wallet-to-wallet transfers between individuals."
Lim said there are limits to identifying taxable income even once the Crypto-Asset Reporting Framework (CARF), a system for automatic exchange of digital asset transaction information between countries, takes effect. "Because this is such a new area, it is a challenge shared not only by Korea but by tax authorities around the world," he said. "This seems to be a problem that time will have to resolve."
The limits of tracking overseas transaction data were also raised a day earlier at the parliamentary audit of the Bank of Korea. Rep. Kim Nam-joon of the Democratic Party of Korea said neither the Bank of Korea nor the Financial Services Commission has been able to determine how widely overseas crypto cards are used in Korea. He said he had requested the relevant data from the central bank but was told it would be difficult to provide because there was no legal basis for doing so.
Crypto cards work by converting virtual assets loaded into a wallet on an overseas platform into fiat currency at the point of payment. They allow holders to spend virtual assets in everyday life without going through a domestic exchange. The government regards gains from disposing of virtual assets in this process as taxable, but questions remain over whether it can obtain actual transaction records and accurately verify profits and losses. From January last year through the end of July this year, cumulative domestic downloads of major crypto card apps reached about 38,000. One virtual asset investor said: "I don't understand how they intend to verify the acquisition cost and actual gains or losses on virtual assets that have moved repeatedly between overseas exchanges and private wallets, when they cannot even measure how much crypto cards are used in Korea."
Domestic exchanges are also behind schedule in building their tax systems. According to the office of Rep. Park Soo-young of the People Power Party, as of September, Upbit was in the preparatory stage of building its system, while Bithumb had not yet begun development. ▷See page 2 of this newspaper's Sept. 14 edition