National Tax Service advances cryptocurrency surveillance with integrated management system

The National Tax Service (NTS) has begun developing a ‘cryptocurrency integrated management system’. The system, which aims to strengthen tax compliance and prevent tax evasion, is scheduled to be completed in 2025.

The move comes at a time when Bitcoin and other cryptocurrencies are experiencing a resurgence of market interest, with Bitcoin reaching an all-time high of $69,000 in November 2021. Investment in cryptocurrencies has surged, especially after the Bitcoin spot ETF was approved in the United States. This is a week where cryptocurrency investment has increased rapidly.

To address the regulatory challenges posed by the anonymity and decentralization inherent in cryptocurrency trading, NTS selected GtiC as the lead consultant for the preliminary stages of system construction. This is a system that analyzes and manages transaction information collected in accordance with the mandatory reporting of transaction details by virtual asset service providers.

The push for a comprehensive system to monitor virtual asset transactions comes in response to the growing prevalence of money laundering, non-traditional inheritance and gift transfers, and offshore tax evasion associated with cryptocurrency trading. In accordance with the revision of the Corporate Tax Act and the Income Tax Act, virtual asset service providers were required to report transaction information, but there was no appropriate system to analyze and manage this.

The National Tax Service aims to prevent tax evasion using cryptocurrency and realize fair taxation by establishing a ‘cryptocurrency integrated management system’. This initiative aligns with the global trend of increasing regulatory scrutiny of virtual assets. According to a report by PwC, the European Union is in the process of establishing market regulations for virtual assets, while the United States has introduced new tax reporting requirements for cryptocurrencies. These regulatory efforts are based on the recommendations of the Financial Action Task Force (FATF) and aim to maintain transparency and order in financial markets, prevent crime and abuse, and protect investors.

The National Tax Service system is expected to help prevent tax evasion and achieve fair taxation by increasing the transparency of cryptocurrency transactions. As the world moves further towards a regulated cryptocurrency environment, South Korea’s proactive steps in this direction are a notable development in the global financial landscape.

The news that Korea’s tax authorities are developing an ‘integrated cryptocurrency management system’ demonstrates Korea’s commitment to adapting to the evolving financial ecosystem and complying with international standards.

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