South Korea’s Ministry of SMEs and Startups has proposed changes to regulations that would allow crypto firms to register as “venture companies.”

If approved, this change would enable these firms to access government benefits such as tax reductions and financial support.

The proposed changes aim to improve the credibility of South Korea’s crypto firms and support the growth of the virtual asset industry.

Currently, crypto firms cannot register as venture businesses due to regulations established in 2018.

The ministry plans to amend the law to include Virtual Asset Service Providers (VASPs) under the venture company classification.

This change would provide them with access to benefits like subsidies.

It would also enable existing venture companies to engage in crypto-related projects.

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🔗 Source: The Block

🧠 Food for thought

1️⃣ South Korea’s dramatic regulatory evolution reflects global crypto maturation

South Korea’s proposal to classify crypto exchanges as “venture companies” represents a remarkable reversal from its previous stance when authorities banned anonymous accounts and placed crypto alongside gambling in regulatory frameworks.

In 2017-2018, South Korea implemented some of the strictest crypto regulations globally, banning anonymous trading accounts after Bitcoin’s price surge raised concerns about “irrational” speculation 1.

The government’s approach led to the closure of over 70 virtual asset service providers during previous administrations, significantly contracting the market from numerous exchanges to just four major players 2.

This policy reversal follows a global pattern where countries initially react with strict restrictions before developing more nuanced regulatory frameworks that balance innovation with consumer protection.

The shift also reflects growing recognition of blockchain technology’s legitimacy, with major South Korean corporations like KT Corporation and SK Telecom developing secure blockchain networks for various applications 3.

2️⃣ Cultural and economic factors drove South Korea’s outsized crypto adoption

Despite representing less than 1% of the global population, South Korea accounted for approximately 30% of worldwide cryptocurrency trading during peak periods, demonstrating a disproportionate influence on the market 4.

This exceptional adoption rate stems partly from South Korea’s technological infrastructure, as the country’s high-speed internet penetration facilitates rapid cryptocurrency transactions 5.

Cultural acceptance of digital goods provided fertile ground for crypto adoption, with South Koreans spending over $3 billion on virtual items in 2017 alone 4.

Socioeconomic factors also played a crucial role, as many young South Koreans viewed cryptocurrency as a potential path to social mobility amid growing wealth inequality and limited economic opportunities, a concept connected to the popular “spoon theory” of inherited wealth 5.

By 2018, approximately 30% of salaried workers in South Korea owned cryptocurrencies, with some estimates suggesting figures as high as 50%, demonstrating a mainstream adoption level far exceeding most developed economies 4.

3️⃣ Cryptocurrency has evolved from technical curiosity to mainstream political issue

The recent election of pro-crypto President Lee Jae Myung signals how digital asset policy has become a significant political issue in South Korea, particularly resonating with younger voters 6.

With over 5 million crypto accounts in the country, politicians now recognize digital asset holders as a meaningful voting bloc, leading both major parties to incorporate crypto-friendly policies in their platforms 6.

The ruling party’s legislative proposals go beyond simply allowing crypto firms to register as venture companies. They also include plans to permit Bitcoin ETFs and establish a digital asset promotion committee 6.

The government’s proposed Digital Asset Basic Act aims to create a comprehensive framework that balances innovation with investor protection, suggesting a more sophisticated approach than the binary permit-or-ban policies of earlier years 6.

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