South Korea's NTS Aims to Seize Cold Wallets, Hitting Legal and Jurisdictional Walls

South Korea's National Tax Service (NTS) has escalated its enforcement of cryptocurrency tax compliance, announcing that it will now target cold wallets-offline storage devices-held by taxpayers who fail to meet their obligations. This marks a significant expansion of the agency's crackdown, which previously focused on crypto assets held on domestic exchanges. The NTS confirmed its ability to monitor transaction histories via blockchain analytics and conduct home searches to seize hardware wallets or PCs if individuals are suspected of hiding assets Cold Wallets No Longer Safe: South Korean Tax Officers Can …^[1].

The NTS has already confiscated and liquidated 146.1 billion won ($103 million) worth of crypto from 14,140 delinquent taxpayers over the past four years Cold Wallets No Longer Safe: South Korean Tax Officers Can …^[1]. Local governments, including Gwacheon, Jeju, and Cheongju, have implemented automated systems to freeze or liquidate exchange-linked wallets for unpaid taxes, with authorities seizing assets ranging from Bitcoin to Ethereum South Korea Seizes Cryptocurrency for Unpaid Taxes^[5]. However, enforcement against cold wallets remains legally complex, as it may require direct legal intervention or compelled disclosure from taxpayers South Korea Expands Crypto Seizures to Enforce Unpaid Taxes^[4].

The agency faces jurisdictional limitations, as South Korean law does not extend to crypto assets held on foreign platforms. Data from the Financial Supervisory Service (FSS) reveals that 78.9 trillion won ($55.6 billion) worth of crypto was transferred from domestic exchanges to overseas wallets or platforms in the first half of 2025, highlighting a growing trend of traders seeking to evade domestic oversight Cold Wallets No Longer Safe: South Korean Tax Officers Can …^[1]. The NTS lacks multilateral cooperation agreements with major jurisdictions like the U.S., China, and Russia, further complicating its ability to track offshore assets Cold Wallets No Longer Safe: South Korean Tax Officers Can …^[1].

The expansion of enforcement aligns with South Korea's broader regulatory push, including a 2025 tax plan imposing a 20% levy on crypto gains and revised venture status rules for crypto-related businesses South Korea Flags Record Suspicious Crypto Transactions in 2025^[6]. While the NTS emphasizes tax compliance, critics argue the measures blur the line between virtual and physical property, raising concerns about privacy and the erosion of personal sovereignty over digital assets Cold Wallets No Longer Safe: South Korean Tax Officers Can …^[1].

The surge in suspicious crypto transactions-36,684 flagged in the first eight months of 2025-underscores the challenges of regulating a rapidly evolving market. Much of the illicit activity involves "hwanchigi," or illegal foreign remittances, and stablecoins like Tether are increasingly used in cross-border laundering schemes . Lawmakers have called for enhanced monitoring and international cooperation to address these risks .