Upbit blocks withdrawals by foreigners pending tax decision
Upbit is restricting cash withdrawal for non-Koreans even though they have been verified under Know Your Customer (KYC) procedures. The measure follows the National Tax Service charging Bithumb 80.3 billion won in withholding tax in December. Before the tax, Upbit had eased withdrawal restrictions on KYC-approved foreigners. “We’re internally looking into possible taxation scenarios, but there are limits to predictions we can make as a private company, so we’re advising [foreign] customers to contact the National Tax Service,” said an Upbit representative. In other words, foreigners will not be able to withdraw Korean won before Korea’s tax authorities decide on a taxation method for the crypto assets of foreigners. Chinese customer complaints On Jan. 28, JoinD reported that more than 6,300 Chinese Upbit users were experiencing inconveniences, citing Chinese news outlets. One anonymous Chinese user in the article complained that the website requested a complicated KYC process, despite the fact that the person had already completed KYC procedures earlier. Upbit responded to the remark that it “enforced KYC conditions to abide by the Financial Action Task Force (FATF)’s money laundering prevention guidelines and make a preemptive move ahead of special finance law reform.” JoinD’s YouTube video that dealt the topic attracted comments from users asking how they could report the company for not allowing withdrawal. One user said Upbit had blocked withdrawal despite them having submitted all of the required paperwork. In other words, Upbit is restricting withdrawal even for users that are KYC-approved. Upbit: “Ask tax authorities” When JoinD requested a response regarding those specific comments, Upbit gave a different explanation from what they had suggested before. The company had originally planned to ease the withdrawal restrictions after enforcing KYC policies, but it is still maintaining the measure due to Bithumb’s taxation issue. The following is Upbit’s statement. “The company is generally enforcing the KYC policy to abide by FATF guidelines and to take preemptive steps ahead of the special finance law reform. We were enforcing foreign client KYC from last December. At the time, we lifted the withdrawal restrictions once their KYC approval was confirmed. But after the news report about Bithumb’s tax, we started an internal investigation on Upbit possibly receiving the same tax bill. From then, we stopped lifting the withdrawal restriction even for foreign customers that additionally went through KYC procedures. We’re examining ways to ease their inconvenience. But as there are limits to what a private company can predict about the situation, we’re are directing inquiries to the National Tax Service. We are doing our best to investigate the matter.” Based on this statement, Upbit will restrict foreign withdrawals until the tax authorities clearly define taxes on cryptocurrencies. What is Bithumb’s 80.3 billion tax about anyway? Last December, the National Tax Service imposed 80.3 billion won in tax on Bithumb. Its claim was that income earned by foreigners trading cryptocurrency is miscellaneous income, and that Bithumb must withhold tax. The stance of the tax authorities is that Bithumb should pay this amount and claim it from its foreign clients, but this is practically impossible. Bithumb did pay the imposed tax in late December, but it is planning to argue against the tax. Industry watchers speculate that the move by the tax authorities without forewarning was motivated by a five-year statute of limitations on tax claims. As for Upbit, the company blocking withdrawal for foreigners can be seen as avoiding the same sort of surprise, especially at a time when discussions on cryptocurrency taxation is ongoing without a fixed answer.