Key Takeaways

South Korean tax authorities has proposed a law to seize and sell crypto assets held by tax dodgers in exchanges.
The new revisions would force crypto exchanges to transfer crypto assets to the tax authorities immediately upon formal request.
It would patch a hole in the current property seizure procedures prohibiting tax authorities from confiscating crypto assets held in digital wallets.

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The tax authorities in South Korea have introduced a bill to amend current tax codes and property seizure procedures to allow confiscation of crypto assets held in digital wallets, the finance ministry said on Monday.

South Korea Targets Crypto Wallets

South Korea moves for complete accountability of crypto earnings in nations finances. 

The South Korean government has proposed to amend the current rules relating to property seizure procedures prohibiting the authorities from confiscating crypto assets held in their native digital form, Korea Times reported Monday. 

If passed, crypto exchanges will have to transfer any crypto assets owned by tax evaders on their platforms to the government immediately upon a formal request. The authorities may move for search-and-seizure of the exchange if they fail to comply with the new orders. 

According to current regulations, the authorities cannot apply property seizure procedures to access digital wallets, making it very difficult for tax authorities to seize crypto assets held by tax dodgers. Moreover, the current provisions only allow for the seizure of assets through a court-granted change in ownership records, which does not apply to property lacking physical presence.

The newly proposed revisions will allow “direct seizing without court-approved change in ownership records. Assets held by tax dodgers in the form of digital coins will no longer evade seizure and forfeiture,” said a ministry official.

The finance ministry will submit 16 revisions in tax codes to the National Assembly on September 3, 2020. Currently, the ruling party in South Korea has a 56% majority in the state’s assembly, increasing the probability of the bill’s ratification.

 The clampdown is part of a broader regulatory effort by South Korea to tighten oversight over crypto markets and root out money laundering and tax evasion facilitated through crypto assets.

A few days prior, on July 22, the Financial Services Commission (FSC) issued a press release warning 27 foreign virtual asset services providers (VASPs) active in the country to stop serving South Korean nationals without reporting or having licensing norms in place.

The recent regulatory actions are part of South Korea’s broader effort to stifle money laundering and tax evasion in general. The crypto-related amendments are expected to come into law on January 1, 2022.

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