The South Korean government is investing 3 billion won (about $2 million) to build an AI-powered tracking system to monitor gains on cryptocurrency ahead of its new tax laws set to take effect on Jan 1, 2027.
While the South Korean government is moving ahead with its plans for taxing cryptocurrency, U.S. lawmakers remain divided over de minimis exemptions for small payments, with Coinbase now being accused of attempting to secure the exemption for stablecoins exclusively.
How will South Korea track crypto transactions to enforce its new tax laws?
The South Korean National Tax Service (NTS) announced that it has officially started the process of building a highly advanced tracking system that is designed to identify and analyze gains from cryptocurrencies to ensure that every citizen pays what they owe under the country’s upcoming tax laws.
The NTS has opened a bid for an integrated system on the Public Procurement Service’s electronic platform. The Public Procurement Service is the official government body responsible for buying goods and services for state organizations. The project is valued at 3 billion won, which is approximately $2.02 million.
The NTS is expected to select a winning bidder and sign a contract before the end of this month, and then, in April, the actual design of the tracking system will begin.
By November, the agency hopes to start pilot operations to test how well the system works. If everything stays on schedule, the system will be fully launched by December of this year. Timing is critical because the South Korean government plans to begin collecting taxes on virtual asset profits starting January 1 of 2027.
The tracking system will make use of AI and machine learning to find “unusual” transaction patterns that might suggest someone is trying to hide their money or evade taxes. Findings will be shared with the Korea Customs Service, the Bank of Korea, and the Ministry of Data and Statistics.
Starting next year, any virtual asset income that exceeds 2.5 million won (roughly $1,700 to $1,800) will be subject to a total tax rate of 22%. This includes a 20% national income tax and a 2% local income tax.
Is Coinbase disrupting tax exemptions for Bitcoin?
Companies like Jack Dorsey’s Block have been pushing for a de minimis tax exemption that would treat Bitcoin like a foreign currency for small payments. However, industry insiders and social media leaks from Bitcoin advocates claim that Coinbase has allegedly been telling lawmakers on Capitol Hill that “no one is using Bitcoin as money.”
The reports also claim that Coinbase is pushing for a tax exemption that exclusively favors stablecoins. A stablecoin-only exemption would mean that using a dollar-pegged coin like USDC, which Coinbase has a financial stake in, would be tax-free for small buys, unlike with Bitcoin.
Faryar Shirzad, the Chief Policy Officer at Coinbase, strongly denied the allegations, calling the claims a total lie and firmly stating that Coinbase has never and will never lobby against Bitcoin.
Despite this denial, representatives from Block have confirmed that Congress is now leaning toward limiting tax exemptions to stablecoins only.
Adam Back, the CEO of Blockstream, pointed out that stablecoins usually do not pay interest to retail users, so there are rarely “gains” to tax in the first place. He argued that the real focus should be on making Bitcoin exempt from capital gains entirely if it is to function as a global digital currency.
Source: https://www.cryptopolitan.com/south-korea-advances-coinbase-criticism-tax/
