South Korea Deploys Tracing Software to Track Private Wallet Transfers Ahead of 22% Crypto Tax

South Korea's National Tax Service (NTS) is gearing up to deploy commercial cryptocurrency tracing software to track transfers between private wallets, ahead of its 22% crypto income tax taking effect on January 1, 2027. The agency has confirmed that it is building an integrated analysis system modelled on tools used by South Korean prosecutors and the US Internal Revenue Service (IRS).

The tax combines a 20% national income tax with a 2% local surcharge on annual crypto gains exceeding 2.5 million won (approximately $1,800). Investors must file their taxes by May 2028 for income earned during 2027, and the tax applies to gains realised on five won-market exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax.

The NTS has acknowledged that identifying all unreported private wallet transactions remains difficult because taxpayers directly control the assets. To combat this issue, the agency will rely on the OECD's Crypto-Asset Reporting Framework (CARF), which begins automatic information exchanges in 2028 covering 2027 transactions.