South Korea to Audit Smart Contracts, Tightens Crypto Tax Checks

South Korea’s Financial Security Institute plans to develop autonomous tools to audit smart contracts used in tokenized securities and stablecoins, and to run training programs for digital-asset security specialists. The institute said it will publish a Smart Contract Security Guide for financial firms.

The FSI’s software will automatically detect common vulnerabilities in contract code and help firms identify weak points in custody and trading systems. Training courses aim to expand technical expertise across banks, brokers and exchanges.

The announcements follow a series of security incidents at public agencies and private platforms. The National Tax Service inadvertently published an unredacted wallet recovery phrase in a press release, prompting the theft of about $4.8 million in tokens. Seoul’s Gangnam Police Station reported the loss of 22 bitcoins from a cold wallet held since 2021. The Gwangju District Prosecutors’ Office lost 320.8 bitcoins in a phishing attack. An employee error at a major exchange in February resulted in bitcoin being sent to customers instead of Korean won.

The Financial Services Commission has tightened exchange rules. Major platforms must reconcile internal ledgers with actual crypto holdings every five minutes, automatically halt trading when mismatches occur, appoint a risk management officer and submit to inspections twice a year.

Days before the FSI announcement, the National Tax Service began operating an AI-driven transaction-tracking system at the Seoul Regional Tax Office with a budget of roughly $2.2 million. The system will combine exchange transaction records from platforms including Upbit and Bithumb with on-chain blockchain data. The AI will flag patterns consistent with money laundering, unreported gifts and offshore tax evasion, and trace activity in non-custodial wallets and the routes traders use to move assets.

The Ministry of Economy and Finance confirmed a 22% tax on crypto gains that will take effect in January for annual gains exceeding 2.5 million won, about $1,800. Moon Kyung-ho, director of the ministry’s income tax department, said, “Final tax guidelines will be ready by the end of 2026.”

Data submitted by exchanges Upbit, Bithumb, Coinone, Korbit and Gopax to lawmaker Ahn Do-geol show the total value of crypto assets held by more than 10 million South Korean investors on those platforms fell 37.5% to about $51.02 billion.

Cryptocurrency transactions are generally irreversible, so authorities are emphasizing automated code checks, stricter exchange controls and AI-assisted tracing to detect irregularities and improve asset custody.