Gwacheon's Crypto Tax Grab: Seizing Wallets by 2025

South Korea's city of Gwacheon is set to launch an innovative system in 2025 aimed at seizing cryptocurrency wallets of residents who fail to meet their tax obligations. The "electronic virtual asset seizing system" is designed to identify and confiscate digital assets belonging to high-income individuals who are suspected of evading taxes by hiding their wealth in cryptocurrencies.

Regulators in Gwacheon City have identified 361 high-income citizens who owe as much as 3 million won in taxes. These individuals are believed to be intentionally concealing their wealth in digital assets to avoid paying the accrued tax. The city has promised to warn these individuals and give them a deadline to fulfill their tax payments. Failure to comply will result in the seizure of their digital assets.

This initiative comes as South Korea is stepping up its efforts to implement tighter oversight on cross-border cryptocurrency transactions to prevent tax evasion and other financial crimes. The city aims to collect additional tax by the first half of this year, utilizing the new crypto wallet seizing system to ensure fairness in the tax system for all citizens who pay their taxes dutifully.

However, the crypto tax proposal in South Korea has faced challenges in becoming as effective as planned. In late 2024, the South Korea Democratic Party (KDP) agreed to postpone the introduction of a crypto gains tax by another two years. As a result, the controversial tax will now take effect in 2027 instead of January 2025. The debate surrounding the timing and impact of the proposal continues.