South Korea says bankrupt exchange accounts remain reportable

South Korea’s National Tax Service ruled on Aug. 28 that residents must continue reporting qualifying cryptocurrency accounts held with bankrupt overseas exchanges, even when trading and withdrawals are unavailable. Summary Korean residents must report qualifying overseas crypto accounts even when bankrupt exchanges block withdrawals entirely. Reporting applies when combined foreign account balances exceed 500 million won at any month-end annually. Affected taxpayers must submit declarations during June of the following calendar year to Korean authorities. Digital assets have been included in South Korea’s foreign account reporting regime since 2023 filings. Reported overseas digital asset holdings fell 5.4% to 10.5 trillion won in the 2026 disclosure cycle. The National Tax Service issued its interpretation after a Korean resident asked whether an inaccessible exchange balance still qualified as an overseas financial account. The taxpayer was a creditor of an overseas cryptocurrency exchange that entered bankruptcy in November 2022. The account holder could no longer trade or withdraw the assets and had entered the exchange’s distribution process. The taxpayer was receiving partia...