South Korea Builds $2.2M AI to Trace Crypto for 2027 Tax

South Korea’s National Tax Service launched a $2.2 million artificial intelligence project on May 8 at the Seoul Regional Tax Office to link exchange filings with blockchain data and trace crypto transactions. The system is scheduled for completion by the end of 2026.

The platform will ingest transaction records from domestic exchanges and on-chain data, then apply pattern-detection algorithms to map fund flows between wallets. It is designed to flag activity that may indicate money laundering, unreported gifts or offshore tax avoidance and to track transfers involving non-custodial wallets.

The NTS plans technical coordination with major local platforms, including Upbit, Bithumb, Coinone, Korbit and Gopax, to ensure exchanges can supply the data and formats needed for automated analysis. Final tax guidance from authorities is expected by the end of 2026.

South Korea’s Ministry of Economy and Finance confirmed on May 7 that a 22% tax on crypto gains will take effect Jan. 1, 2027. The levy combines a 20% national income tax with a 2% local tax and applies to annual gains above 2.5 million won (about $1,800). Moon Kyung-ho, director of the ministry’s income tax department, confirmed, ‘We will proceed with virtual asset taxation as scheduled in January next year.’

The tax measure was delayed twice from an original 2025 start date after political disputes and industry pushback. Some traders have discussed moving activity to offshore platforms in jurisdictions that do not levy crypto capital gains taxes.

Participation in cryptocurrencies in South Korea has grown: a Financial Services Commission survey shows more than 11 million verified crypto investors, up from 5.58 million at the end of 2021. The pace of new tradeable accounts slowed from 25% growth in the first half of 2024 to 3% in the second half. Market participants point to weaker crypto returns compared with stocks and commodities and the fact that most domestic exchanges offer only spot trading.

Head counts at major exchanges reflect earlier expansion. Filings on the Financial Services Commission’s disclosure system show combined staff at Upbit and Bithumb reached 1,334 by the end of 2024, up from 682 in 2021. Upbit’s head count rose from 370 to 696 and Bithumb’s from 312 to 638 over the same period.

The NTS’s AI project is intended to strengthen enforcement ahead of the new tax by matching exchange-reported transactions to user accounts and by revealing transfers that route funds through multiple wallets or offshore addresses. Authorities have said they will publish detailed implementation rules and reporting requirements by the end of 2026.