South Korea’s Ministry of SMEs and Startups has announced plans to amend legislation that would allow cryptocurrency businesses to be formally recognized as venture companies—marking a significant shift in the country’s regulatory stance on digital assets. The move would enable crypto exchanges and brokerage service providers to access the same government benefits enjoyed by traditional tech startups.
Under current regulations, companies involved in virtual asset trading have been excluded from the official venture company classification, a designation that opens the door to tax breaks, financial support, and broader state-backed incentives. This exclusion, implemented under the Special Act on Promoting Venture Businesses in 2018, lumped crypto firms alongside businesses in the nightlife and gambling industries.
The proposed reclassification would reverse that stance, recognizing crypto-related companies as potential drivers of technological innovation. The ministry noted that the policy change is aimed at “revitalizing and broadening” South Korea’s venture ecosystem by legitimizing Virtual Asset Service Providers (VASPs) as part of the country’s startup economy.
Tax Battles and Industry Impact Sparked Reform
The shift comes in response to growing pressure from within the country’s crypto sector. Dunamu, the operator of Upbit—South Korea’s largest crypto exchange—lost its venture business status in 2018 and subsequently faced an additional corporate tax bill of approximately $18 million. The company contested the charge in court but failed to overturn the ruling.
That case became emblematic of the growing divide between South Korea’s ambitions to foster innovation and its outdated classification system that treated crypto businesses as high-risk outliers.
If passed, the legislative amendment would provide a clearer framework for integrating blockchain-related businesses into the mainstream startup ecosystem. It would also open new opportunities for existing venture-certified firms to expand into digital assets without jeopardizing their government-backed benefits.
The ministry emphasized that recognizing crypto firms as legitimate venture entities will help strengthen the overall startup sector while accelerating the maturation of the virtual asset industry.
Presidential Support Bolsters Crypto Momentum
The proposed reclassification aligns closely with the agenda of recently elected President Lee Jae Myung, whose administration has taken a notably pro-crypto stance since assuming office. One of Lee’s top initiatives—bringing Korean won-backed stablecoins into a formal legal framework—is already underway, with lawmakers from the ruling party pushing new bills to that effect.
Financial institutions in the country have responded swiftly, filing trademarks for stablecoin ticker symbols and preparing for entry into a regulated digital currency space. Meanwhile, regulators are also evaluating the country’s longstanding ban on cryptocurrency exchange-traded funds (ETFs), as well as restrictions on institutional participation in crypto markets.
Industry watchers view the venture reclassification proposal as a cornerstone in South Korea’s broader plan to build a robust digital finance sector, while also correcting policy inconsistencies that have hindered crypto innovation.
Quick Facts
- South Korea plans to allow crypto firms to qualify as official venture companies.
- The move would unlock tax incentives and state subsidies for registered crypto businesses.
- Dunamu lost its venture status in 2018, resulting in an $18 million tax penalty.
- President Lee Jae Myung supports pro-crypto legislation, including stablecoin and ETF reforms.
