Korean National Tax Service Launches Crypto Tax-Evasion Crackdown in July: Even Self-Custody Wallets and Mixing Services Can Be Traced

According to a report by ZDNet Korea, South Korea’s National Tax Service (NTS) has issued a procurement notice for a “Virtual Asset Tax Evasion Response Transaction Tracking Software” on April 15, with system selection planned for completion by the end of May, deployment in June, and official launch in July. The new system will be able to track self-custody (non-custodial) wallets such as MetaMask and Phantom, and it will include “demixing” technology to crack down on tax evaders who hide fund flows using mixers.

This marks the third time South Korea has upgraded its crypto tax enforcement and investigation system since 2024. In tandem with a new tax law starting in 2026 that officially brings crypto assets under taxation as “other income” under the comprehensive income tax, enforcement tools are also being upgraded to improve collection efficiency.

Procurement target: Chainalysis and TRM Labs tools are the main candidates

The tracking system requirements listed in the official notice cover approximately 70 million types of virtual assets worldwide and 45 blockchain layers, including Bitcoin, Ethereum, Ripple (XRP), and all major stablecoins. Commercialized solutions that meet these specifications are mainly provided internationally by Chainalysis and TRM Labs. The two companies’ on-chain analysis tools have already been adopted by tax and law-enforcement agencies in countries such as the United States, the United Kingdom, South Korea, and Japan.

The system’s core functions include: real-time transaction monitoring; visualization of fund flows between wallets and exchanges; “demixing” to reverse the effects of mixers; cross-chain asset identification; and an on-chain tracking framework targeting offshore tax evasion.

Self-custody wallets become a new focus: enforcement scope expands from exchanges to personal private keys

In the past, crypto tax investigations relied mainly on KYC/transaction records submitted by exchanges, so tracking would be disrupted as soon as funds were transferred out of an exchange and into self-custody wallets such as MetaMask, Phantom, or Ledger. With the new system, using on-chain analysis tools, investigators can link the addresses of self-custody wallets with centralized exchange deposit/withdrawal records, and then reconstruct a complete picture of asset flows through on-chain transaction graph tracing.

An NTS official told ZDNet Korea, “All blockchain transactions are public, and identity recognition to a certain degree can be achieved through analysis programs.” This statement highlights the NTS’s core enforcement logic: publicly available on-chain data itself is a lawful and usable basis for tax investigations.

Enforcement measures: freezing exchange accounts, prosecuting undeclared gifts and estates

After the new system goes live, the NTS can combine three types of enforcement measures: first, for hidden crypto assets that were not reported, directly freeze the exchange account linked to that address; second, for transfers of crypto assets involving “undeclared gifts/estates,” initiate judicial prosecution procedures; and third, establish an investigation framework for offshore tax evasion, in coordination with South Korea and the United States’ CARF (Crypto-Asset Reporting Framework) cross-border information exchange mechanism.

This move by South Korea also echoes a recent U.S. policy direction: by the end of 2025, the White House is considering aligning with the CARF tax reporting framework in order to obtain information on overseas crypto transactions from U.S. taxpayers, forming a “domestic on-chain tracking + cross-border information exchange” dual track.

Paired with the 2026 new tax law: “other income” separation

Starting in 2026, South Korea will tax income from crypto assets separately under “other income.” Portions of annual gains exceeding 2.5 million Korean won will be taxed at a rate of 22% (including local taxes). This tax law was originally planned to take effect in 2022, was postponed multiple times, and will finally be implemented in 2026. With the new enforcement tools in place, South Korea is moving from “tax law taking effect” to the “actual collection” phase.

This also means that over the past nearly five years, personal investors in South Korea who have relied heavily on self-custody wallets and DeFi to evade taxes will face clearly higher investigation risk. Combined with the action in South Korea to revise the “Foreign Exchange Transactions Act” to regulate stablecoins, it is evident that the overall regulatory pace is converging “on-exchange + off-exchange + on-chain” into the same tax and fund-flow framework.

Implications for tax enforcement across the Asia-Pacific

South Korea’s scaled, standardized rollout using Chainalysis and TRM Labs tools provides a reference template for other Asia-Pacific markets with similarly high crypto penetration, such as Japan, Taiwan, and Singapore. North Korean hacker group Lazarus has continued to launder money in recent years using cross-chain DeFi protocols, and a CoinDesk analysis report on April 20 also noted that its attack methods have evolved from social engineering to “exploiting structural protocol weaknesses.” With tax and security authorities upgrading their on-chain tracking capabilities at the same time, this will become a major narrative for Asia-Pacific crypto compliance in 2026–2027.

The meaning for individual investors is straightforward: self-custody wallets are no longer a “black box” for taxes. Any address that has had inflows or outflows linked to an exchange could be targeted in reverse. In the 2026 tax-law era, compliant reporting of crypto gains is already a more reliable path than relying on self-custody wallets.

This article — “South Korea’s National Tax Service will launch a crypto tax evasion crackdown in July: even self-custody wallets and mixers can be traced” — first appeared in Chain News ABMedia.