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South Korea’s National Tax Service (NTS) is spearheading the creation of a ‘Virtual Asset Integrated Management System.’ This initiative marks a significant effort to combat crypto tax evasion and promote fair taxation.
South Korea aims to effectively scrutinize and manage information on virtual asset transactions within the system.
Why South Korea is Priortising Crypto Taxation
The timing of this project coincides with a period of heightened interest in the virtual asset market. Notably, Bitcoin recently surged past the $71,000 mark, surpassing its all-time high. This milestone has indeed reignited the global interest in cryptocurrencies.
Additionally, the United States’ approval of Bitcoin spot ETF trading has significantly increased investment in virtual assets. Consequently, taxation and monitoring of these assets to prevent illegal activities like money laundering have become crucial government concerns.
In February, the NTS selected GTIC as the project lead. Over the next four months, they will consult on the system’s development, aiming for a 2025 launch. The system aims to tackle virtual assets’ anonymity and decentralization challenges. Authorities believe these features have facilitated illegal transactions, including money laundering and offshore tax evasion.
“This system is intended to effectively analyze and manage the information collected due to the obligation to submit transaction records of virtual assets,” Digital Daily explains.
Read more: How to Reduce Your Crypto Tax Liability: A Comprehensive Guide
Additionally, Gyeonggi province’s “Arbitrator Virtual Asset Tracking Electronic Management System” is a testament to South Korea’s proactive approach to crypto regulation. This system has successfully recouped approximately $4.7 million in tax arrears.
Moreover, the Financial Intelligence Unit (FIU) of South Korea reported a surge in suspicious crypto transactions in 2023. This underscores the need for more robust monitoring mechanisms. South Korea plans to implement the Virtual Asset User Protection Act in 2024. This act will impose stringent penalties for illicit crypto activities, including lifetime imprisonment.
Globally, the regulation of virtual assets is gaining momentum. The European Union and the United States are introducing new regulatory and tax reporting standards. These efforts align with the Financial Action Task Force’s (FATF) recommendations, aiming to ensure market transparency and protect investors.