South Korea’s National Tax Service (NTS) has initiated an unscheduled tax investigation into Upbit and Korbit, two major domestic cryptocurrency exchanges, heightening tension across the industry.
The Seoul Regional Tax Office’s International Transaction Investigation Bureau began its surprise investigation on February 20, targeting Dunamu, the operator of Upbit, and NXC, the largest shareholder of Korbit. The bureau specializes in investigating offshore tax evasion, primarily focusing on companies with substantial overseas transactions.
Industry sources suggest the tax authorities are scrutinizing the two exchanges for suspected offshore tax evasion. Particularly, the investigation reportedly centers not on investor profits or exchange fees, but on the flow of funds transferred overseas, where tax evasion may have been detected.
The NTS previously conducted a nationwide simultaneous investigation into offshore tax evasion in July of last year, targeting nine individuals involved with cryptocurrency companies accused of hiding profits. At the time, the companies investigated included those issuing cryptocurrencies through overseas paper companies to conceal earnings and those omitting revenue earned from providing technical services paid in cryptocurrency.
Upbit is already under scrutiny by financial authorities for alleged violations of Know Your Customer (KYC) regulations. With restrictions on coin deposits and withdrawals for new customers already enforced by the financial regulator, the impact of this tax investigation could be particularly significant.
As the investigation unfolds, transparency in transactions and regulatory compliance are expected to become critical issues for the cryptocurrency industry. The market and investors are closely watching the potential ramifications this tax probe may have on the operations of cryptocurrency exchanges.
