Crypto Quill

Two Asian regions, Nepal and South Korea, are tackling pressing financial challenges in the digital asset space: Nepal is intensifying efforts to combat crypto-related fraud, while South Korea’s Paju City is tightening its grip on tax defaulters hiding assets in digital currencies.

Nepal’s Efforts to Address Rising Crypto Fraud

Nepal, which banned cryptocurrencies in 2017, is grappling with an increase in digital currency-related frauds despite the legal ban. The Financial Intelligence Unit (FIU) of Nepal recently published a Strategic Analysis Report shedding light on the growing threat posed by digital asset scams, particularly those leveraging social media and mobile banking systems. These platforms provide scammers with vast opportunities to target victims, often using fake investment promises or social media impersonation to deceive individuals into investing in fraudulent schemes.

Scammers Exploit Vulnerabilities

According to the FIU, the fraudsters exploit the vulnerabilities within Nepal’s mobile banking system, converting proceeds from these scams into digital assets to hide their tracks. The report highlights how mixers are used to obscure the flow of stolen funds, making recovery efforts more complicated for authorities. A significant issue is the underreporting of digital asset crimes, as many victims are hesitant to report scams due to the illegal status of cryptocurrencies in Nepal.

Despite these challenges, law enforcement has recovered over $1.4 million linked to crimes such as narcotics, fraud, and human trafficking. However, much of the fraud involving digital assets remains unresolved.

Public Awareness and International Cooperation

To address these issues, Nepal is focusing on public awareness campaigns to educate citizens on how to recognize and avoid crypto scams. The FIU has also recommended increased scrutiny of financial transactions and the adoption of systems from neighboring countries like India and China, which have partnered with telecommunications companies to combat fraud.

Internationally, Nepal is exploring best practices from countries like the UK, which has established the Action Fraud system, and Singapore’s Anti-Scam Command (ASCom) to fight digital asset-related fraud more effectively.

South Korea’s Paju City Targets Tax Defaulters Using Digital Assets

Meanwhile, Paju City in South Korea has taken a hard stance against tax defaulters by targeting those who have converted their assets into digital currencies to evade taxes. In a recent move, the city’s tax authorities received permission to seize the digital assets of 17 tax defaulters, amounting to KRW 50 million (USD 35,881) worth of cryptocurrencies.

Virtual Asset Seizures and Warnings

Authorities in Paju City have given the offenders until the end of November to settle their KRW 124 million (USD 88,000) in unpaid taxes. Should the defaulters fail to pay, the city plans to seize their digital assets from local exchanges and sell them to recover the outstanding tax amounts.

This is not the first time Paju has confiscated digital assets from tax defaulters. In July, the city seized nearly $72,000 from delinquent taxpayers who were using digital currencies to hide their assets. The National Tax Service (NTS) of South Korea is taking similar steps across the country, with a broader campaign aimed at preventing citizens from relocating assets abroad or converting them into digital currencies to avoid taxation.

Growing National Crackdown on Tax Evasion

The crackdown is part of a larger initiative by South Korean authorities to curb tax evasion through digital assets. The NTS has already seized over $182 million from tax offenders, with a significant portion of that coming from the sale of digital assets. In the coming years, South Korea is also expected to implement a 20% digital asset tax policy, aimed at regulating the growing crypto market while avoiding excessive investor backlash.