What happened?
The South Korean government has kicked off a strategy where both domestic and foreign cryptocurrency transactions will be recorded and shared with the National Tax Service. South Korea has officially joined the Cryptocurrency-Asset Reporting Framework (CARF) at the Organization for Economic Co-operation and Development (OECD), enabling standardized information exchange about crypto transactions for taxation purposes. The government is planning to issue an administrative notice later this month detailing regulations for the CARF’s implementation.
Who does this affect?
This impacts not only domestic investors trading on overseas exchanges but also non-residents who are transacting on local platforms like Upbit and Bithumb. The national as well as international crypto traders will be subjected to increased transparency, leading to a significant clampdown on anonymous trading. Additionally, exchanges such as Upbit and Bithumb may encounter hurdles related to compliance and possible decreases in volume as privacy-conscious users may choose to trade elsewhere.
Why does this matter?
This development is crucial because it highlights the growing global focus on regulation and oversight within the crypto market. By implementing CARF, South Korea aims to prevent offshore tax evasion and enhance tax transparency through crypto. Although the information sharing system won’t start until 2027, the collection of transaction records will commence from next year. This may affect the market dynamics as it could influence investor behaviour, particularly those who value privacy.