Overseas Crypto Cards Open Tax Blind Spot in Korea

With South Korea set to begin taxing cryptocurrency gains next year, crypto payment cards are emerging as a potential blind spot in tax enforcement. Because payments run through overseas exchanges, private wallets and foreign card issuers, tax authorities cannot track the transactions in real time.

Stablecoin payments made with overseas crypto cards, whose use has been growing in South Korea, will also be subject to taxation starting next year, according to financial industry officials on Sept. 13. If a stablecoin is spent when its price is higher than at the time of acquisition, the gain is counted as cryptocurrency income. Tax authorities say fairness must be considered because a payment, like converting holdings into won or swapping them for another cryptocurrency, involves disposing of the asset and realizing a gain.

Crypto cards work by loading cryptocurrency into a wallet on an overseas platform, with the holdings converted into fiat currency at the point of payment. Their use is spreading quickly in South Korea on the appeal of convenience, allowing stablecoins acquired through crypto investing to be spent directly in daily life without first being cashed out into won on a domestic exchange.