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

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

Francisco Memoria
  • 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

Western Union CEO Says Company is Prepared to Add Cryptocurrencies When It's Necessary

Western Union CEO Says Company is Prepared to Add Cryptocurrencies When It's Necessary
Omar Faridi

Western Union, the leading international money transfer service provider, recently released a video in which it noted that the company is “uniquely positioned to connect the cash and digital world.”

“On-Ramp & Off-Ramp For Global Money Movement”

Western Union’s video explained that the giant money transfer service currently has access to “billions of bank accounts” throughout the world and also works with “over half a million retail agent locations.” This allows Western Union to work as an “on-ramp and off-ramp for global money movement.”

Commenting on how the company is prepared to integrate cryptocurrencies to their cross-border payment platform, Odilon Almeida, the president of Western Union, remarked:

Western Union is ready today to adopt any kind of currency. We already work with 130 currencies. When we feel it’s the right time to introduce cryptocurrencies to our platform … technology-wise, it’s just one more currency. I think cryptocurrency may become one more option of currency or assets around the globe to be exchanged between people and businesses. If that happens, we would be ready to [introduce them on out platform].

“Still Don’t Understand Blockchain?”

In response to Almeida’s explanation, a Twitter user named jas (@a1mk3) noted:

You're not transferring money, you're digitally updating a ledger on a sender & receiver side, so a prefunded account can transfer local Fiat. Still don't understand blockchain by now?

Although it’s true that Western Union’s current money transfer platform does not use blockchain technology, the company has been providing a reliable and effective service for many decades.

Regardless of what specific technology is being used to accomplish a particular task, the end result is what users will be concerned about. In this case, funds are being transferred from one party to another and what's important is how much the transaction costs, and how long it takes for the payment to go through. Whether blockchain is used to complete money transfers is irrelevant to most.

When we connect to the internet, we may be using the best fiber-optic technology and the latest communications protocols and standards. However, that’s not something the end-user is generally interested in. The consumers are busy doing other real-world things, which the underlying technology has made easier and more practical.

As CryptoGlobe reported in early October, Daniel Larimer, the chief technical officer (CTO) at Block.one, a distributed ledger technology (DLT)-focused firm, had said:

When people start making things easier, when blockchain actually makes people’s lives easier and more secure, that’s when it’ll get widespread adoption.

Not Recognizing Revolutionary Technology When You See It?

Paradigm-changing technologies don’t come along every day. However, those who don't realize that a particular innovation will change the way business or other social activities are conducted in the future may pay a heavy price for their ignorance.

Interestingly, Twitter user mystery x pointed out that back in 2000, the CEO of Blockbuster, a company that offered a wide variety DVD rentals with numerous store locations across America, had rejected a $50 million offer from Netflix. The creator of Netflix wanted to sell his company to Blockbuster for what may now be considered an absurdly good offer as Netflix’s market capitalization has now exceeded $32 billion.

Because Blockbuster's managment did not embrace new technology, the company's stores had to shut down. The firm's CEO and board members failed to realize that “streaming videos” and “on-demand live video content” would be in very high demand in the future. Whether or not this is the case with blockchain technology and payments, is something only time will tell.