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

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.

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.

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