South Korea's tax agency deploys on-chain surveillance ahead of 2027 levy

South Korea’s National Tax Service is building an AI system that tracks crypto transactions and catches tax evaders. The agency kicked off the project on May 8 at the Seoul Regional Tax Office.

The budget for the new AI system is ~$2.2 million, and the finish date is by the end of 2026.

The system will pull crypto transaction records from exchanges and blockchain data, then flag transactions like money laundering, unreported gifts, and offshore tax evasion.

New crypto investor growth dropped off a cliff

South Korea now has +11 million verified crypto investors, per a Financial Services Commission (FSC) survey. That’s almost double the 5.58 million logged crypto users at the end of 2021.

But the pace fell hard. Tradeable account growth hit 25% in H1 of 2024. Then it dropped to 3% in the H2 of last year.

Industry people are blaming weak returns compared to stocks and commodities, plus the fact that Korean exchanges only do spot trading. No derivatives, no leverage.

Staffing at the big exchanges still indicates the earlier boom. Combined headcount at Upbit and Bithumb reached 1,334 by the end of 2024, up from 682 in 2021, according to filings on the FSC’s disclosure system. Upbit grew from 370 employees to 696. Bithumb went from 312 to 638.

South Korea’s AI system tracks crypto wallet hops

The NTS system is designed to merge crypto exchange filings with on-chain analysis.

ETNews reported that the AI system will map out crypto fund flows between wallets and use AI-based pattern detection to spot suspicious moves.

Tracking non-custodial wallet transactions is included. Tax authorities have struggled with that using exchange reports alone.

South Korea’s 22% tax clock is ticking

South Korea’s Ministry of Economy and Finance confirmed on May 7 that a 22% tax on crypto gains will take effect on January 1, 2027. The tax is broken down into a 20% national income tax and a 2% local tax.

Moon Kyung-ho, director of the ministry’s income tax department, said, “We will proceed with virtual asset taxation as scheduled in January next year.” The tax hits gains of +2.5 million won per year or ~$1,800.

The NTS is coordinating details with top crypto exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax. The NTS final tax guidelines are expected to be ready by the end of 2026, Moon said.

The new tax has been delayed twice from its original 2025 start due to political fights and industry pushback.

Now that the 2027 deadline is confirmed, some traders are already talking about moving to offshore exchanges in countries without crypto capital gains taxes, per Cryptopolitan’s earlier coverage.

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