Seeking to increase its tax efficiency, the South Korean city of Paju is confiscating and selling its citizens’ cryptocurrencies. The decision affects few people, but it marks the beginning of a new model.
South Korean flag close to cryptocurrencies
Paju, a city in South Korea with a population of 520,000, will sell cryptocurrencies held by tax debtors if they fail to pay off their debts by the end of the month, local newspaper Yonhap News reported.
The text points out that these cryptocurrencies were in brokerages and had already been previously confiscated. In total, 17 investors were notified by the authorities.
Another country aiming to adopt this same policy is Spain. However, some point out that this action is already possible with current laws.
South Korea to sell cryptocurrencies held by tax debtors
Seeking to increase its tax efficiency, the South Korean city of Paju is confiscating and selling its citizens’ cryptocurrencies. The decision affects few people, but it marks the beginning of a new model.
Although there is a myth that cryptocurrencies cannot be confiscated, brokerages and other companies that hold these assets for their clients are required to cooperate with such requests.
“We have sent warning notices to 17 people who together have a total of 124 million won ($114,000) in back taxes,” a Paju city spokesperson told local media. “If they fail to pay by the end of this month, 50 million won ($48,000) worth of virtual assets they own will be transferred to the city’s account and sold.”
“We are sending a clear message that debtors will not be able to hide their assets. We intend to trace their assets to the end and apply the necessary measures to recover the amounts owed.”
The measure may even work at first. However, it is hard to believe that this will continue. After all, future tax debtors will not leave their cryptocurrencies in exchanges because they know about this treatment, avoiding confiscation, as pointed out by lawyer Fábio Silva, a Bitcoin specialist:
“Bitcoin is unconfiscatable when it is in self-custody, and when it is in the custody of companies, the government may request blocking. Currently in Brazil, this requires the issuance of individual letters to each brokerage firm, but the National Council of Justice (CNJ) is developing CriptoJud, which aims to integrate Brazilian exchanges with the Judiciary, speeding up the blocking process,” said Silva.
In any case, the case sets a major precedent. For example, authorities could ask stablecoin issuing companies to freeze balances of those who have debts with the government.
Going further, it is also not difficult to see the same action being taken with central bank digital currencies, also known by the English acronym CBDCs.