South Korea Moves to Lift Venture Restrictions on Crypto Businesses

The South Korea's Ministry of SMEs and Startups is hoping to rewrite the Korean stereotype of digital assets, by offering a proposal to recognise crypto-related business in the country as a venture company.

This policy shift marks a significant change in how the government views the digital asset sector and is expected to unlock a range of financial incentives and support for blockchain and crypto startups.

Currently, businesses operating in the “virtual asset” industry are excluded from the government’s venture company classification-instead are placed under the same category as gambling ventures and nightclubs.

This exclusion has limited their access to valuable tax breaks, reduced real estate acquisition taxes, and discounted broadcast advertising rates.

But in recent years, Korea has shifted its perception towards digital assets. Korean lawmakers have commonly used "safeguarding the users" as an excuse to block and ostracise crypto-businesses.

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Breaking: South Korea introduces new crypto regulations to enhance user protection! The new rules aim to safeguard users' assets and maintain the country's status as a hub for cryptocurrency innovation. <a href="https://twitter.com/hashtag/CryptoRegulations?src=hash&ref_src=twsrc%5Etfw">#CryptoRegulations</a> <a href="https://twitter.com/hashtag/SouthKorea?src=hash&ref_src=twsrc%5Etfw">#SouthKorea</a> <a href="https://twitter.com/hashtag/UserProtection?src=hash&ref_src=twsrc%5Etfw">#UserProtection</a> <a href="https://t.co/Z4oLBS9Uo8">pic.twitter.com/Z4oLBS9Uo8</a></p>— Facts Prime (@factsprime35) <a href="https://twitter.com/factsprime35/status/1815271527010492855?ref_src=twsrc%5Etfw">July 22, 2024</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

But with the government already laying down the necessary groundwork for regulations and safety nets required to safeguard Korean investors, Korea is finally ready to open its arms to digital assets.

With the new amendments, crypto businesses can now gain access to a series of government benefits, including a 50% corporate income tax cut for five years, a 75% business real estate acquisition tax cut and a broadcast ad discount of up to 70%.

The ministry will accept public comments on the proposed changes until August 18. No final enforcement date has been set, as authorities continue to gather feedback from industry stakeholders and the broader public.

South Korea’s Crypto Run

This policy proposal comes amid a broader trend of crypto-friendly reforms in South Korea.

Recently, the Bank of Korea paused its central bank digital currency (CBDC) pilot to allow time for the government to clarify its stance on stablecoins and how a CBDC would fit into the nation’s digital finance strategy.

President Lee Jae-myung, who took office last month, ramps up support for the digital finance sector. Lee has also advocated for the lifting of restrictions on crypto ETFs and institutional trading.

He has also backed legislative efforts to introduce Korean won-based stablecoins, a move that has already triggered a wave of trademark fillings by major financial institutions.

His administration’s openness to digital assets has been reflected in rising investor confidence, with shares of major banks like Kakao Bank, Kookmin Bank, and the Industrial Bank of Korea surging 10% to 19% after filing for stablecoin-related trademarks.