From Grey Market to Green Light: South Korea Moves to Recognize Crypto Startups as Legitimate Venture Companies

South Korea is signaling a major policy shift in its approach to the crypto industry. The country is proposing a legal amendment that would officially recognize cryptocurrency-related businesses as certified venture companies, unlocking access to tax incentives and government funding previously denied to the sector. This move reflects a broader change in regulatory attitude, closely aligned with the pro-crypto stance of newly elected President Lee Jae-myung.

A Bold Reclassification for Crypto Companies

The South Korean Ministry of SMEs and Startups recently announced a proposal to revise the Special Act on Promoting Venture Businesses, aiming to include crypto exchanges and brokerages in the list of businesses eligible for venture company status.

Until now, companies involved in virtual assets were categorized alongside casinos and nightclubs — sectors deemed ineligible for tax relief or startup subsidies. This classification not only restricted the growth of the crypto industry but also led to significant financial losses for firms like Dunamu, the parent company of major exchange Upbit, which was forced to pay back approximately $18 million USD in corporate tax after losing its innovation company status in 2018.

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Unlocking Resources: Compliance, Tax Breaks, and R&D Funding

Venture certification in South Korea is more than a label — it signifies official government recognition of a company’s innovation and development potential. Certified companies gain access to a suite of benefits, including:

• Corporate tax deductions
• Financing and investment support
• Research and development grants

If the proposed amendment is passed, Virtual Asset Service Providers (VASPs) would finally gain a compliant path to these resources. This would not only help existing crypto startups but also legitimize new entrants exploring blockchain and digital finance.

As the Ministry put it:

“This initiative acknowledges the role of virtual asset businesses in driving innovation and aims to boost their contribution to the broader startup ecosystem.”

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A Pro-Crypto Presidency Accelerates Change

This reform push dovetails with recent policy shifts under President Lee Jae-myung, who has rapidly implemented crypto-friendly measures since taking office. These include:

• Allowing financial institutions with over ₩500 million KRW (~$370,000 USD) in capital to issue stablecoins
• Considering the repeal of the ban on crypto ETFs
• Evaluating ways to allow institutional participation in digital asset trading

Such moves are part of a broader national effort to support the growth of compliant crypto businesses while distancing them from illegal activities that have long plagued the industry.

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Could South Korea Become Asia’s Crypto Policy Leader?

If passed, the revised law could position South Korea as one of Asia’s most forward-looking nations in crypto policy. While many regional regulators still take a cautious stance, South Korea is moving rapidly to clarify its rules, promote compliance, and stimulate industry growth.

This legal transformation could help the country attract more international crypto firms, leveraging its large trading population and newly established policy advantages.

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Risk Disclaimer:
Cryptocurrency investments are highly volatile and may result in the loss of your entire capital. Always assess risks carefully before investing.