South Korea's NTS Seizes Cold Wallets, Sparking Privacy vs. Tax Equity Debate

South Korea's National Tax Service (NTS) has escalated its efforts to combat cryptocurrency tax evasion by extending enforcement to cold wallets, a move that includes home searches and the seizure of offline storage devices. Under the National Tax Collection Act, the NTS can now analyze blockchain transaction histories to identify individuals suspected of concealing assets offline. If suspicions arise, officials are authorized to conduct home searches and confiscate hard drives or cold wallets to recover unpaid taxes Cointelegraph^[1]. This strategy builds on the agency's prior success in seizing and liquidating over $108 million in crypto assets from more than 14,140 individuals since 2021 Cryptopolitan^[2].

The expansion of enforcement reflects South Korea's rapid adoption of cryptocurrency, with nearly 11 million investors as of June 2025-up from 1.2 million in 2020-and trading volumes surging to $4.7 billion from $730 million in the same period Cointelegraph^[1]. The NTS has intensified oversight amid a surge in suspicious transaction reports (STRs), with virtual asset service providers filing 37,000 STRs as of August 2025, exceeding the combined totals of 2023 and 2024 Coincentral^[3]. These efforts aim to address challenges posed by offshore exchanges and self-custody solutions, which complicate asset tracking under domestic law Atlas21^[4].

The NTS's authority to freeze and liquidate assets applies to both custodial and non-custodial wallets. For cold wallets, enforcement requires physical intervention, as these devices are disconnected from the internet to enhance security. While this method effectively prevents hacking, it also enables tax evaders to hide assets. The NTS has demonstrated its capability to act decisively, having liquidated $103 million in crypto assets from 14,140 delinquent taxpayers over four years Cryptonews^[5]. However, enforcement remains limited in cases involving overseas exchanges, where South Korea lacks multilateral agreements with major jurisdictions like the U.S., China, and Russia Atlas21^[4].

The policy shift has raised privacy concerns among crypto holders, with critics arguing that home searches and asset seizures infringe on individual rights. Proponents, however, emphasize the necessity of such measures to ensure equitable tax collection and deter illicit activities. The NTS's actions align with broader regulatory efforts, including the 2023 Virtual Asset User Protection Act, which mandates stricter safeguards for investor funds . These developments underscore South Korea's commitment to integrating digital assets into its tax framework, even as it grapples with the logistical and ethical complexities of enforcing compliance in a decentralized financial landscape.