Authorities in South Korea have seized KRW53 billion ($47 million) from digital currency holders who have been accused of evading taxes. The seizure, which is one of the largest from the tax authorities, was conducted in Gyeonggi, one of the largest provinces in the country. The authorities partnered with digital currency exchanges who provided information on their clients.
South Korea has been strict on digital currency taxation, but according to a report by the Financial Times, investors have ignored the warnings. The paper reported that 12,000 people fell victim to the seizure, all of whom authorities accuse of dodging tax obligations. The authorities seized BTC, Ethereum and other digital currencies in Gyeonggi, the province that oversees the greater Seoul area and is home to 14 million residents.
Authorities in Gyeonggi have been investigating the tax evaders for several months. They believe that the number of residents who have been dodging taxes stands at 140,000.
Kim Ji-ye, the director-general of the Gyeonggi Province Fairness Bureau remarked, “We will do our utmost to protect law-abiding taxpayers and fulfil our fair taxation mandate by probing and tracing assets that tax dodgers may be concealing in the midst of the recent cryptocurrency trading fervor.”
This is the largest digital currency seizure for back taxes in South Korea’s history, according to authorities. They said local digital currency exchanges are being used to conceal assets as they haven’t been collecting the full identification information for their clients.
This has become one of the most contentious issues in the Korean digital currency market. New laws which come into effect this year require the exchanges to not only collect the full identification information for all users, but to also register with financial authorities and get the necessary licenses. They must also have a relationship with a bank, with this being among the toughest requirements.
Commercial banks in South Korea have been reluctant to associate with digital currency exchanges. As it stands, only the Big Four—Korbit, Coinone, Upbit and Bithumb—have partnerships with banks. And even for these heavyweights, there are reports that their banking partners are rethinking their association. Upbit recently delisted 24 tokens in its bid to align itself with the regulators and its banking partner K Bank.
It hasn’t helped that the topmost regulator has threatened that all exchanges, including the Big Four, could be shut down. Eun Sung-soo said in April that the Financial Services Commission (FSC), which governs the industry, has yet to receive the applications for licenses that are necessary to operate in South Korea.
Eun stated, “There are an estimated 200 cryptocurrency exchanges in the country. But if the current situation continues then all of them could be shut down.“