South Korean crypto holders must still report even if overseas crypto exchanges collapse

South Korea’s National Tax Service ruled on August 28 that a resident who holds crypto at an overseas exchange must still declare that account under the country’s foreign-account disclosure rules.

The rule still applies even when the overseas exchange collapses and locks the holder out of trading or withdrawals. The rule lands months before Seoul begins taxing crypto gains in January 2027.

Why did South Korea ask users to report holdings even if crypto exchanges collapse?

A question asked by a Korean resident was what gave rise to the latest ruling. The resident was a creditor of an overseas crypto exchange that went bankrupt in November 2022.

According to the National Tax Service, the resident held token balances on the platform before the collapse. Later, they joined the estate’s distribution process and began receiving partial payouts into a domestic foreign-currency account.

The resident then asked the tax agency if reporting overseas financial accounts under Article 53 of Korea’s Act on International Tax Adjustment still applies in the event of an account getting stuck in bankruptcy limbo, where they cannot trade or withdraw; the tax agency said yes.

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