Virtual Asset Businesses Incorporated as 'Venture Companies'

Ministry of SMEs and Startups Revises Regulation After 7 Years

Previously Treated as 'Entertainment Businesses'

Major Signal to Foster Cryptocurrency

The Ministry of SMEs and Startups is working on a plan to grant 'venture company' status to virtual asset businesses. If a business model based on blockchain technology meets certain technical evaluation standards, it will be distinguished from gambling-related industries and included as a target for policy support. This move is interpreted as the official incorporation of the virtual asset industry into venture policy frameworks.

On the 9th, the ministry announced a proposed amendment to the Enforcement Decree of the Special Act on the Promotion of Venture Businesses, removing 'blockchain-based cryptocurrency trading and brokerage' from the list of restricted sectors for venture companies. If the decree is amended as planned, blockchain-based cryptocurrency trading and brokerage companies will be eligible for venture certification if they meet the requirements.

For seven years, domestic virtual asset businesses have been unable to receive venture company certification. In 2018, due to concerns over gambling characteristics of virtual assets, the government revised relevant laws, grouping cryptocurrency trading and brokerage together with businesses such as bars and casinos as 'excluded industries' for venture status. At the time, Dunamu, operator of Korea’s largest exchange Upbit, lost its venture certification after the decree was changed, marking the first time a company lost such status due to an industry classification change.

Venture certification serves as an 'entrance' to various startup support programs. Without this certification, companies are excluded from key support systems, including income and corporate tax reductions, technology credit guarantees, and participation in government R&D projects. Accordingly, industry insiders have criticized the existing rule for classifying technology-based virtual asset firms together with gambling businesses, calling it highly disconnected from reality.

Analysts say the government is trying to distinguish between project-type firms focused on coin issuance and those based on technology by relaxing regulations. Recently, asset management firms and financial institutions have increasingly started handling blockchain-based virtual assets as regulated assets. As the proportion of technology service providers increases in the domestic market, policy authorities’ perceptions are also changing. The industry views this amendment as the first step for the virtual asset sector's entry into the regulatory system but notes that eligibility criteria remain a key factor.

By Jeonghoon Ahn ajh6321@hankyung.com