Tax Agency Finds South Korea's Biggest Cryptocurrency Exchange Not Guilty of Tax Evasion

  • South Korean authorities conducted a three-month-long investigation into Bithumb's transaction records to evaluate its tax compliance.
  • The results saw Bithumb isn't guilty of tax evasion, but that it still needs to pay $28 million.

Bithumb, along with fellow exchange UPbit, was earlier this year hit with an investigation that saw various government agencies probe its operations, focusing on transaction histories to evaluate tax compliance. Recent reports suggest it was found not guilty of tax evasion.

According to local news outlet Yonhap, the National Tax Service (NTS), the Financial Services Commission (FSC) and the Korea Financial Intelligence Unit (KFIU), all started probing Bithumb, one of the country’s largest cryptocurrency exchanges, after investors raised concerns.

Earlier this year, the government raided the headquarters of UPbit in Seoul for allegedly deceiving investors, and almost immediately after turned to Bithumb over potential malpractice and suspicious business activities.

Specifically, the cryptocurrency exchange saw its profits rise by a factor of 171 last year, a figure that was released to the public because of its parent company BTCKorea, which is publicly owned. Interestingly, the surge could partly be attributed to the cryptocurrency space’s rise last year, which saw most cryptocurrencies hit new all-time highs.

The regulators’ investigation, which lasted for about three months, found that Bithumb’s revenues came from transaction and trading fees. An NTS representative stated:

"NTS initiated several investigations into Bithumb between 2014 and 2017, and over the past four years, Bithumb has continuously paid all of the taxes imposed to the company without any conflict with the NTS.”

NTS representative

Notably Bithumb wasn’t completely cleared, as according to the local news outlet the cryptocurrency exchange is now facing a massive bill of around 30 billion won ($28 million) for back taxes. The representative added:

“While a $28 million tax was imposed onto Bithumb, no evidence [of] tax evasion and illicit activities was shown and the NTS closed the investigation into Bithumb officially, clearing the company.”

NTS representative

In cooperation with South Korean authorities, Bithumb banned accounts from 11 countries as part of its anti-money laundering (AML) efforts. These countries were selected by the Financial Action Task Force for failure to comply with AML guidelines.

South Korean regulators have been keeping a close eye on the crypto space, as earlier this year they outlawed anonymous trading. Coinone, another local cryptocurrency exchange, is set to face charges for running an “illegal gambling operation” because it offers users margin

Mike Novogratz: BitMEX Is ‘A Freaking Money Making Machine’

On Wednesday (March 20th), Mike Novogratz, a former Goldman Sachs partner, as well as founder and CEO of crypto-focused merchant bank Galaxy Digital, gave an interview to Anthony Pompliano ("Pomp"), a founding partner at Morgan Creek Digital Assets, during which he provided many valuable insights into the crypto space.

Binance

"I think the most influential guy in the whole industry right now is CZ [Changpeng Zhao] and what they are doing at Binance... He is running at 100,000 miles an hour... Now, he doesn't have the same regulatory oversight that the rest of us do.. He's just playing the game of 'Catch Me If You Can'. But he is an unbelieveably dynamic entrepreneur."

Asian Crypto Markets

"When you look back at the last three or four years, the most profitable parts of this industry... ,in terms of building a business, was 'can you connect into the gambling culture?'. The single best business out there right now is Arthur Hayes. It's jut a freaking money-making machine! But Binance, BitMEX, Bitfinex, they all connected into this love of Asian gambling... Being able to profit on that... literally gave these guys a war chest to grow other businesses... I don't think in the long run those margins will be sustainable... the barriers to entry aren't high enough."

General Sentiment on Wall Street

"So, they have a monster business, and why take risks on something that is really small until they are convinced it's going to be real? So, they're getting close.

I know, Goldman, for instance, is gearing up around securities tokens. They are not doing anything yet, but they're getting really ready and looking at all the questions: where would you store them, do you have to build your own custody, or can you use someone else's custody.

Listen, the regulatory framework isn't there yet for securities token. We're working really hard on our security token business... They are all going to be part of the security token world... It's a new wrapper, but it's going to be a big big business... The legacy players are doing their homework.

What Mike's Children Think About Crypto

"You know, my kids used to get asked at school all the time [about crypto] once I started being public... [they say] 'My Dad's got enough for all of us!'"

Bitcoin

"Ten and a half years ago, we have this social experiment... we've got a technology that allows us to create soveriegn money... And it's worked! $70 billion in market cap ten years later... It's staggering! So, someone should bow down and dub Satoshi's toes and thank him!...

I think of gold as a store of value... Bitcoin provides a really interesting alternative to gold... Forget the other stuff that might come out of it. Forget the layer 2 solutions and payments and everything else. Just at its core, sovereignty should be expensive. People bitch about Bitcoin [being] expensive. I don't think it's expensive. I actually wired from my Bread wallet $10,000 worth of Bitcoin  to someone a week ago, and it cost like six cents. Seems pretty damn cheap to me!

And so, I think the macro case for it is pretty strong... And so, if you're going to put a couple of percent of your portfolio [in Bitcoin], there's a decent chance it catches wind.. Fidelity is just getting set up... Bakkt is getting delayed a little bit, but it's not going to get delayed forever... They're going to be in the game. And there are lots of other players coming...

Gold is a $7.5 trillion market cap... So, we're a 100 times off on that... And we're not going there in Bitcoin in the next year or two, but over a 20 year period, could that happen? Easily! Easily! And that's giving zero optionality to all the other stuff ... So, it seems like a pretty smart portfolio bet."

What the Federal Reserve Thinks About Crypto

"I remember going to visit the Fed in 2014 with Dan Morehead... To be fair, they were well-versed, even then, and their view was 'It'll never be currency because fixed supply currencies just don't work -- they're too easily squeezed, manipulated... but maybe as a payment system.

And they love the blockchain concept... they were fascinated by it...

It just isn't nearly big enough to reach their level of importance. We have a $20 trillion economy. I literally talked to one of the Fed governors two weeks ago about stablecoins. He said 'no big deal'... They probably should worry about it more than they do, but it's just not on their radar... The problem is by the time they start paying attention, it'll be too late to do much about it."