South Korea Plans to Grant Crypto Firms Venture Company Status

Major Policy Shift for Cryptocurrency Industry

South Korea is preparing to implement a groundbreaking policy change that will allow cryptocurrency firms to register as venture companies. South Korea's Ministry of SMEs and Startups is moving to eliminate the restriction preventing crypto firms from registering as venture companies, which would grant them access to state-backed support programs.

This significant regulatory development marks a shift in South Korea's approach to cryptocurrency businesses and could reshape the digital asset landscape in the country.

Current Restrictions on Crypto Businesses

Right now, crypto businesses in South Korea are excluded from registering as venture companies. That's because current laws group them with restricted sectors like gambling and nightlife which are categories that don't qualify for state support. This classification has prevented legitimate cryptocurrency firms from accessing government support programs available to other technology companies.

The existing regulatory framework has created challenges for crypto firms seeking to establish themselves as legitimate technology businesses in South Korea's competitive market.

Benefits of Venture Company Classification

The proposed reclassification would provide crypto firms with access to substantial government benefits. South Korea is moving to reclassify crypto trading and brokerage firms as "venture companies," a status that would grant them access to government subsidies, tax incentives, and financial support.

These benefits include tax reductions, financial support programs, and government subsidies that are currently available to other venture companies in South Korea. The support measures are designed to foster innovation and growth in the technology sector.

Virtual Asset Service Providers Under New Framework

The ministry plans to amend the law to include Virtual Asset Service Providers (VASPs) under the venture company classification. This change would bring cryptocurrency exchanges, wallet providers, and other digital asset services under the venture company umbrella.

The inclusion of VASPs in the venture company category represents a significant recognition of the cryptocurrency industry's legitimacy and potential contribution to South Korea's technology sector.

Implementation Timeline and Process

The Ministry of SMEs and Startups has announced plans to move forward with the legislative amendments necessary to implement this policy change. The proposal seeks to remove cryptocurrency firms from the restricted business categories that currently prevent them from accessing venture company benefits.

The implementation process will require amendments to existing laws and regulations governing venture company classifications in South Korea.

Impact on South Korea's Crypto Market

South Korea has one of the world's most active cryptocurrency markets. In November 2024, the daily average trading value at domestic virtual asset exchanges reached KRW 14.9 trillion. This trading volume is comparable to the combined trading volumes of South Korea's traditional stock exchanges.

The policy change is expected to boost innovation and attract more investment to the cryptocurrency sector in South Korea. By providing access to government support programs, the country aims to maintain its position as a leader in digital asset adoption and technology development.

Regulatory Framework Development

The cryptocurrency industry in South Korea operates under the Virtual Asset User Protection Act, which came into effect in July 2024. The Act on the Protection of Virtual Asset Users (Act No. 19563) (VAUPA), promulgated on July 18, 2023, came into force on July 19, 2024.

This comprehensive regulatory framework provides the foundation for legitimate cryptocurrency operations in South Korea and establishes clear guidelines for virtual asset service providers.

Government Support Programs Available

Venture companies in South Korea can access various government support programs, including tax incentives, financial assistance, and research and development support. A 50% to 100% reduction of CIT is available for new start-up SMEs for the first five years, provided that they are located in areas other than metropolitan overpopulation control areas and engaged in any of the specified businesses.

These programs are designed to support innovation and technological advancement in emerging industries, making them particularly relevant for cryptocurrency firms developing new technologies and services.

Future Outlook for Crypto Innovation

The proposed policy change signals South Korea's commitment to fostering innovation in the digital asset sector. By removing regulatory barriers and providing access to government support programs, the country aims to create a more favorable environment for cryptocurrency businesses.

This development could attract international cryptocurrency firms to establish operations in South Korea and encourage domestic innovation in blockchain technology and digital assets.

Conclusion

South Korea's decision to classify cryptocurrency firms as venture companies represents a significant policy shift that could transform the country's digital asset landscape. The move demonstrates the government's recognition of the cryptocurrency industry's potential and its commitment to supporting legitimate blockchain businesses.

The implementation of this policy could position South Korea as a global leader in cryptocurrency innovation and attract significant investment to the sector. As the regulatory framework continues to evolve, cryptocurrency firms in South Korea will have new opportunities to grow and contribute to the country's technology sector development.