South Korea Requires Reporting of Crypto Accounts Even After Exchange Bankruptcy

South Korea’s National Tax Service (NTS) issued an interpretation on August 28 stating that residents must keep reporting qualifying overseas cryptocurrency accounts even when the exchange has entered bankruptcy and trading or withdrawals are blocked.

Reporting threshold and filing deadline

The obligation applies when the total balance of all foreign financial accounts held by a taxpayer exceeds 500 million won (about $350,000) at the end of any month in a calendar year. The combined balance is assessed across all qualifying accounts, so the rule can apply even if no single account reaches the threshold. Affected individuals and corporations must submit a foreign account report in June of the following year, providing the foreign institution’s details, account number and the balance at month‑end.

Scope of accounts

Digital assets were added to South Korea’s foreign‑account reporting regime starting with the 2023 filing cycle. Accounts opened with overseas virtual‑asset service providers, such as cryptocurrency exchanges, are now treated like foreign bank, securities or fund accounts. Self‑custody wallets are excluded because they are not accounts with a foreign provider.

Bankruptcy does not relieve reporting duties

The NTS interpretation arose after a Korean resident, who was a creditor of an exchange that declared bankruptcy in November 2022, asked whether the inaccessible balance still counted as a reportable foreign account. The agency concluded that the original exchange account remains reportable because it was opened to trade digital assets, regardless of the loss of access or ongoing distribution proceedings.

The ruling concerns disclosure obligations only; reporting an account does not automatically create a tax liability on the full balance. Taxpayers must still determine the value of any disputed or partially recoverable claim, which may differ from the balance shown on the exchange’s interface.

Recent reporting statistics

• Overseas digital‑asset holdings reported for the 2026 cycle fell 5.4% to 10.5 trillion won.
• Individual holdings rose 5.4% to 9.8 trillion won, while corporate holdings dropped 61.1% to about 0.7 trillion won.
• Total foreign financial accounts reported by Korean taxpayers reached 107.1 trillion won, with 7,484 individuals and companies filing, a 9.1% increase.

Implications for taxpayers

Residents whose combined foreign balances exceeded the threshold in 2026 will need to file their disclosures in June 2027. Creditors of bankrupt exchanges should retain all relevant documentation—monthly statements, bankruptcy claim notices, and distribution records—to support the reported balances and any subsequent recoveries.

The NTS is preparing additional enforcement tools ahead of the planned 22% crypto‑income tax that will take effect on January 1 2027, covering gains from both domestic and overseas activities.