Today, South Korea has officially committed to joining the Organization for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF). This marks a significant step towards global transparency in cryptocurrency transactions. However, this decision will be implemented from 2027. From 2027, South Korea will begin sharing data on foreign investors’ activities on major local exchanges like Upbit and Bithumb with international tax authorities. Moreover, Korean residents’ overseas crypto trades will be reported to the National Tax Service.

Earlier, South Korea is endeavoring to pass a bill to legitimize stablecoins in the country.

South Korea Joins CARF to Tighten Global Crypto Tax Reporting

This move, announced by the Ministry of Economy and Finance, reflects a growing global effort to regulate the rapidly expanding crypto market and combat tax evasion. Data sharing with other countries is set to commence as early as next year. This step will align South Korea with an international framework adopted by the OECD in June 2023. The decision builds on the OECD’s 2022 report, which initially proposed enhanced data-sharing mechanisms to address tax evasion, now extended to include digital assets.

This step aligns South Korea with nations like Germany and the US, where crypto gains are already subject to taxation. The National Tax Service recently reported a 7% increase in declared overseas virtual assets, reaching KRW 11.1 trillion this year. This shows the scale of crypto activity driving this policy shift. By joining CARF, South Korea aims to reinforce its existing financial account reporting framework, ensuring that all overseas trades by Korean nationals are reported regardless of value.

Exchanges May Face Rising Compliance Costs Under New Framework

For local exchanges, the implications are significant. Platforms like Upbit and Bithumb will face new compliance challenges, including the obligation to submit personal and trading details of foreign users to their respective home tax agencies. This is expected to increase operational costs and may lead to short-term dips in trading volume as privacy-focused users seek alternatives.

However, the long-term outlook suggests a more legitimate and stable market, potentially attracting institutional investors as bad actors are weeded out. The OECD’s XML Schemas, released on October 2, 2024, will standardize data transmission and ensure seamless integration with South Korea’s system by 2027. Moreover, as the crypto landscape continues to evolve, this move positions South Korea as a key player in shaping global regulatory standards.