South Korean Tax Service ‘Launches Probe into Upbit and Small Coin Issuers’

South Korea’s National Tax Service (NTS) has reportedly begun a tax-related probe into Upbit, the nation’s market-leading crypto exchange.

The body is also reportedly investigating several other “smaller,” unnamed token issuers.

Upbit Probe Reportedly Linked to Overseas Transactions

Per TV Chosun, the probe also involves the Seoul Regional Tax Office’s International Transaction Investigation Bureau.

The tax bodies, the outlet wrote, began their probe on February 20, with “on-site investigations.”

The International Transaction Investigation Bureau specializes in tax investigations on companies that deal with overseas transactions and “overseas tax evasion”-related cases.

The probe comes as a second major blow to Upbit this week. The nation’s top financial regulator, the Financial Services Commission (FSC), this week revealed it is preparing to issue “sanctions” against Upbit after investigating some 700,000 Know Your Customer (KYC)-related violations.

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Heavy Fines Incoming?

Experts think the KYC-related probe could result in Upbit paying fines worth millions of US dollars.

It is unclear at this stage if the two probes are linked. However, in recent years, local tax bodies around the country have stepped up efforts to stamp out tax evasion.

These local-level probes have seen officials claim that some citizens are using crypto to “hide their income.”

The same local tax officials say that they can now use blockchain analytics tools and crypto exchange data to monitor citizens they think may be trying to conceal their funds from tax investigators.

Authorities Want a ‘Better Understanding’ of ‘Crypto Flows’

Upbit’s operator Dunamu posted operating profits of 83.9 billion won (almost $ 58.5 million) in the third quarter of FY2024.

TVChosun added that unnamed industry insiders “expect” that “simultaneous tax investigations into Upbit and small foundations that issue cryptocurrencies” will provide investigators with a more “comprehensive understanding” of “fund flows in the crypto industry.”

The launch of all forms of cryptoassets remains illegal under South Korean law. However, many companies have overcome this legal hurdle by launching their coins via overseas subsidiaries and partner firms.