South Korea’s government is set to reshape its crypto landscape by reclassifying crypto firms as startups, unlocking tax breaks and subsidies. This shift reverses a 2018 policy that sidelined blockchain companies. The Ministry of SMEs and Startups announced the proposal today, aiming to add crypto into the nation’s innovation ecosystem.
New Rules Unlocks Startup Benefits
The Ministry of SMEs and Startups seeks to amend the Special Act on Promoting Venture Businesses, allowing crypto firms to register as venture companies. This reclassification would remove them from a restricted list alongside gambling sectors, granting access to startup perks.
Virtual Asset Service Providers (VASPs), including trading and brokerage firms, could benefit from reduced taxes and government-backed funding. The law aims to reduce operational costs, enhance liquidity, and stimulate investment, potentially increasing trading volumes. If approved, the change could legitimize crypto firms, encouraging innovation and market growth in South Korea’s digital asset sector.
Startup Benefits and Qualification Criteria
Venture company status offers crypto firms significant advantages, including tax reductions, subsidies, loan guarantees, and financial support typically afforded to technology startups. These benefits can result in minor cost savings for companies, as shown by Dunamu’s experience, which faced an $18 million tax liability in 2018 following the loss of its venture status.
To qualify, firms must meet strict criteria, which include investment volume, research and development intensity, and technical evaluations established by the government. Importantly, blockchain-based firms, which have been ineligible since 2018, would now be considered eligible under the proposed amendment.
This could position South Korea as a hub for crypto innovation, drawing global capital and talent. The proposal aligns with a broader shift to embrace cryptocurrency as a legitimate industry, potentially altering South Korea’s economic landscape. President Lee’s support for stablecoins and ETFs underscores this pro-crypto stance, with a stablecoin bill also in progress.
The reclassification could reverse past setbacks, like Dunamu’s failed lawsuit against tax penalties. By offering financial relief, the law aims to make crypto firms competitive, driving job creation and technological advancement. If passed, this could mark a turning point for South Korea’s crypto sector, aligning it with global blockchain trends.
