South Korea Builds AI Tax Tracker While Moving To Drop Crypto Tax

bitcoinistPublished on 2026-03-21Last updated on 2026-03-21

Abstract

South Korea's tax authority is investing $2 million in an AI system to track unreported cryptocurrency income, set to launch by late 2026. This move comes despite a legislative push by the opposition party to abolish the planned 20-22% crypto tax scheduled for 2027. Lawmakers argue the tax creates an uneven playing field, as stocks are not subject to a similar financial investment income tax, and enforcing it on foreign investors would be administratively burdensome. Simultaneously, law enforcement is tightening rules on privacy-focused cryptocurrencies, and exchanges will be required to monitor transactions for fraud starting in October.

South Korea’s tax authority is spending roughly $2 million to build an artificial intelligence system that hunts down unreported cryptocurrency income — even as lawmakers push to eliminate the very tax that system would help enforce.

A Bill To Kill The Crypto Tax

The People Power Party introduced the measure on March 18, with floor leader Song Eon-Seok presenting changes to the Income Tax Act that would wipe out all planned rules taxing digital asset profits.

Under current law, crypto gains would be hit with a 20% income tax starting in 2027, climbing to 22% once local taxes are added.

Song says that’s unfair. South Korea already treats digital assets as commodities under its value-added tax system, and layering an income tax on top, he argues, means investors get taxed twice for holding the same asset.

The timing sharpens the argument. Lawmakers recently abolished the financial investment income tax — a move aimed at supporting traditional capital markets and protecting retail investors.

Song pointed out that scrapping taxes for stock investors while keeping them for crypto holders creates an uneven playing field that’s difficult to justify.

Foreign investors also factor into the equation. Officials said taxing overseas participants would generate major administrative headaches, making enforcement more costly and complex than any revenue collected would be worth. The bill aims to keep rules simple and the market open.

Total crypto market cap currently at $2.37 trillion. Chart: TradingView

Enforcement Gets Stronger Anyway

While the move works its way through the legislature, the National Tax Service is moving in a different direction. The agency announced plans to deploy an AI-powered tracking platform, funded at around 3 billion Korean won, to identify cryptocurrency transactions that go unreported. The system is expected to be running before the end of 2026.

That creates an unusual situation: the government may soon have a sophisticated tool to catch crypto tax evaders operating in a market where there may be no crypto tax to evade.

Image: MasterSergeant/stock.adobe.com

Law enforcement is also tightening its grip on privacy-focused cryptocurrencies — so-called “dark coins” that conceal transaction details.

The National Police Agency recently rolled out new rules requiring dedicated digital wallets, software-based storage systems, and stricter protocols for handling seized crypto assets.

A police official noted that storage methods have changed dramatically, from physical warehouses to managing wallet addresses and private keys.

Exchanges Face New Rules Starting In October

Consumer protections are getting an upgrade as well. Beginning in October, cryptocurrency exchanges operating in South Korea will be required to actively scan all transactions for signs of fraud.

The Financial Services Commission confirmed that exchanges must flag and freeze suspicious transfers, help victims recover lost funds, and share information about potential fraud with investigative agencies.

Featured image from Pexels, chart from TradingView

Related Questions

QWhat is the purpose of the AI system being built by South Korea's tax authority, and how much is it costing?

AThe AI system is being built to hunt down unreported cryptocurrency income, and it is costing roughly $2 million (3 billion Korean won).

QWhy is the People Power Party proposing to eliminate the crypto tax, and what is their main argument?

AThe People Power Party is proposing to eliminate the crypto tax because they argue it creates an unfair double taxation, as digital assets are already treated as commodities under the value-added tax system. They also believe it creates an uneven playing field compared to stock investors who recently had their financial investment income tax abolished.

QWhat is the current planned tax rate for crypto gains in South Korea, and when is it scheduled to start?

AUnder current law, crypto gains would be subject to a 20% income tax starting in 2027, which would climb to 22% once local taxes are added.

QWhat new responsibilities will cryptocurrency exchanges have starting in October, according to the article?

AStarting in October, cryptocurrency exchanges will be required to actively scan all transactions for signs of fraud, flag and freeze suspicious transfers, help victims recover lost funds, and share information about potential fraud with investigative agencies.

QWhat is the unusual situation created by the government's simultaneous actions regarding cryptocurrency taxation?

AThe unusual situation is that the government is building a sophisticated AI tool to catch crypto tax evaders, even as lawmakers are pushing a bill that could eliminate the very crypto tax that the system is designed to enforce.

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