South Korea's Tax Crackdown Turns Cold: Authorities Target Hidden Crypto Vaults

South Korea's National Tax Service (NTS) has intensified its enforcement against cryptocurrency tax evasion, targeting assets stored in offline "cold wallets" for the first time. The agency has seized over $108 million in digital assets from more than 14,000 individuals since 2021, leveraging blockchain analytics and legal powers under the National Tax Collection Act to freeze accounts, request exchange data, and liquidate assets to recover unpaid taxes The Korea Times^[1]. In a notable escalation, NTS officials confirmed they are prepared to conduct home searches to confiscate cold wallet devices, hard drives, and other offline storage solutions if evidence suggests individuals are concealing crypto holdings dimsumdaily.hk^[3]. This marks a shift from previous efforts that focused primarily on exchange-held assets.

The crackdown aligns with South Korea's broader push to integrate digital assets into its tax framework. With crypto adoption surging-investor numbers rose to nearly 11 million by June 2025, an 800% increase since 2020-and trading volumes reaching $4.7 billion, authorities face growing challenges in tracking illicit activity. The Financial Intelligence Unit (FIU) reported a record 36,684 suspicious transaction reports (STRs) in the first eight months of 2025, surpassing the combined totals of the previous two years . Much of this activity involves "hwanchigi" schemes, where illicit funds are converted into crypto via offshore platforms and later cashed out in local currency.

NTS has also expanded its tools to include crypto-tracking software, enabling investigators to analyze transaction histories for signs of evasion. While enforcement on domestic exchanges is well-established, cold wallet seizures pose legal complexities, requiring direct intervention or compelled disclosure from taxpayers Coinpaprika^[2]. The agency's efforts are further complicated by the outflow of 78.9 trillion won in crypto assets to overseas platforms in 2025, as domestic jurisdiction does not extend to foreign exchanges dimsumdaily.hk^[3].

South Korea's regulatory approach reflects a global trend of balancing innovation with oversight. Kazakhstan, for example, has shut down 130 unlicensed crypto platforms in 2025 and seized $16.7 million in illicit assets, while introducing stricter AML measures like mandatory ID verification for large transactions The Korea Times^[1]. South Korea's 2021 legislation, which facilitates crypto asset seizures, underscores its intent to close enforcement gaps between traditional finance and digital assets. However, critics argue the focus on cold wallets may push evasion further underground, as international cooperation remains limited to 74 countries under the Multilateral Tax Administration Cooperation Agreement, excluding major jurisdictions like the U.S. and China dimsumdaily.hk^[3].