South Korea is gearing up to introduce a cutting-edge tracking system aimed at ensuring that users of virtual assets adhere to tax regulations. According to reports from local outlet Digital Daily on Monday, the National Tax Service has selected a consulting firm to develop a sophisticated system capable of monitoring transactions involving digital currencies.
GTIC has been chosen by the Tax Service to develop the virtual asset integrated management system, with the decision made at the close of February, marking the beginning of a consulting project expected to span approximately four months.
The move comes in response to a notable uptick in investment in virtual assets following the approval of Bitcoin Spot ETF trading in the US. Consequently, governments are now turning their attention to regulating taxation on bitcoin transactions and cracking down on illicit activities such as money laundering to uphold the integrity of the financial system.
South Korea’s decision to roll out a tracking service coincides with Bitcoin’s recent surge past $70,000 to reach a historic high on Friday. This surge has largely been attributed to increased investment in US-based Bitcoin Spot ETFs, alongside anticipation of the upcoming bitcoin halving event in April and expectations of global interest rate reductions.
The initiative aims to oversee data acquired through the compulsory reporting of virtual asset transactions. Following the consulting phase, a proposal has been put forth to develop the system, with an anticipated release date set for 2025.
In the wake of amendments to the Corporate Tax Act and the Income Tax Act, virtual asset businesses were mandated to submit transaction details. However, lacking an analytical system, the National Tax Service seeks to combat tax evasion and ensure fair taxation through the implementation of a comprehensive management system.
South Korea has taken a proactive approach to regulating digital assets by enacting laws to stabilize the cryptocurrency market. These regulations compel crypto service providers to bolster their anti-money laundering and know your customer (KYC) systems, register with Korean financial authorities, open corporate bank accounts, provide real-name accounts to clients, and enforce more rigorous AML/KYC procedures.
Officials in the country are also contemplating the approval of Spot Bitcoin exchange-traded funds (ETFs).