South Korea Lifts Crypto Venture Restrictions for Tax Breaks

South Korea’s Ministry of SMEs and Startups has announced plans to lift restrictions that currently prevent crypto-related businesses from qualifying as venture companies. This move aims to grant these firms access to various tax breaks and financial support, which are currently unavailable to them. The ministry’s proposal reflects a shift in the government’s perception of the digital asset industry, recognizing the need for legal and institutional safeguards to protect users.

The current regulations exclude firms operating in the “virtual asset” sector from the government’s venture classification, limiting their access to benefits such as a 50% corporate income tax cut for five years, a 75% business real estate acquisition tax cut, and broadcast ad discounts of up to 70%. The ministry’s announcement highlights the government’s focus on nurturing the digital asset industry and the establishment of legal protections for users, making it inappropriate to restrict the industry further.

The proposed amendment would allow crypto businesses to be qualified as venture companies, enabling existing venture companies to expand into the digital asset space without losing their classifications. This change is expected to revitalize and expand the venture ecosystem, supporting the growth of the virtual asset industry. The ministry will accept public comments on the proposal until Aug. 18, with a final enforcement date yet to be announced.

This development follows a growing trend of crypto-friendly policies in South Korea. The Bank of Korea recently informed commercial banks participating in its central bank digital currency (CBDC) pilot that the trials were temporarily suspended. This pause is meant to give the government time to clarify its stablecoin policy and how a CBDC might fit into the broader digital finance ecosystem.

Newly elected President Lee Jae-myung campaigned on a list of crypto promises, including allowing the issuance of stablecoins pegged to the local fiat currency. This move aligns with President Lee Jae Myung’s broader support for the digital finance sector, which includes lifting restrictions on crypto ETFs and institutional trading, as well as backing legislative efforts to introduce Korean won-based stablecoins.

The proposed reclassification reflects a significant change in South Korea’s approach to its crypto industry, transitioning from viewing it as a speculative outlier to integrating it into the formal innovation economy. If adopted, the amendment could pave the way for increased investment and regulatory clarity for domestic crypto firms. This development comes as the Financial Services Commission (FSC) has presented a roadmap to the Presidential Committee on Policy Planning, proposing the approval of spot crypto ETFs.

The plan outlines implementation measures for spot crypto ETFs and regulatory frameworks for won-based stablecoins in the second half of 2025. Historically, the FSC has blocked crypto ETFs due to concerns over volatility and financial risk, maintaining that cryptocurrencies were unsuitable as underlying assets. However, the proposed changes signal a more favorable stance towards integrating digital assets into the mainstream financial system, potentially fostering a more supportive environment for the crypto industry in South Korea.