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South Korea’s National Tax Service plans to introduce commercial blockchain tracing software to track crypto moving between private wallets as the country prepares to begin taxing digital asset income on January 1, 2027.
The NTS says the tools would improve its ability to trace activity involving self-custodies assets, where tax authorities cannot rely on domestic exchanges for complete transaction records. It is considering systems similar to those used by Korean prosecutors, police, and the US Internal Revenue Service.
NTS Tracing Tools Will Target Private Wallet Transfers
The NTS acknowledged that it cannot identify every unreported transaction involving private wallets because users control the addresses directly and transfers can occur without regulated intermediaries.
Commercial tracing software could help officials follow movements between blockchain addresses and compare that activity with records obtained from exchanges, investigations, and taxpayer filings.
The agency has not named a software provider, disclosed a procurement timetable or explained how wallet addresses would be linked with individual taxpayers. Holding crypto in self-custody does not itself create a tax liability. Taxable gains or income from covered crypto transactions will fall under the incoming regime.
Korean Exchanges Must Report Transactions From January 1
Registered South Korean virtual asset service providers will face separate reporting requirements when the tax regime starts on January 1.
Providers must submit transaction statements and aggregated trading records to the NTS quarterly. The agency has been preparing implementation guidance with Upbit, Bithumb, Coinone, Korbit and Gopax.
Crypto income above the annual 2.5 million won deduction is scheduled to face a 20% national tax plus 2% local income tax.
CARF Will Add Data From Overseas Crypto Platforms
South Korea also plans to use the OECD’s Crypto-Asset Reporting Framework to obtain information about residents trading through participating foreign platforms.
Officials expect CARF reporting to cover 2027 transactions even if the first international exchange of records occurs in 2028.
The tax remains scheduled to start January 1 despite another proposed delay. People Power Party lawmaker Kim Sang-hoon introduced legislation on August 28 seeking a further two-year postponement.
Unless lawmakers approve another delay, the NTS has about four months to prepare its exchange reporting, international data-sharing and private-wallet tracing systems before the 2027 tax regime begins.
