Korea's Crypto Card Conundrum: Overseas Payments Slip Past Tax Authorities

South Korea's plan to tax cryptocurrency gains starting next year has uncovered a potential blind spot in tax enforcement - overseas crypto payment cards. These cards, popular among Koreans for their convenience and ability to spend stablecoins directly in daily life, allow users to load cryptocurrency into an overseas wallet before converting it into fiat currency at the point of payment.

The issue arises because when cryptocurrency is spent through a foreign card, domestic tax authorities cannot immediately identify the transaction. This is because the transaction takes place on an overseas platform, bypassing local financial institutions and exchanges.

An analysis by Web3 research firm Tiger Research and global blockchain analytics company Chainalysis found that major crypto card apps have been downloaded over 38,000 times in South Korea from January last year to the end of July this year. Hong Kong-based RedotPay accounted for about 25,000 of those downloads.

The tax authorities' inability to track these transactions in real-time raises concerns about fairness and the practical limits of identifying each small payment made on overseas platforms. An official in the cryptocurrency industry noted that even if taxes are assessed after the fact through audits, there may be difficulties in tracking down each transaction.