South Korea Lifts Ban on Crypto Venture Companies

South Korean regulators have decided to lift a nearly decade-long ban that barred cryptocurrency-focused businesses from qualifying as venture companies. This move is expected to have a significant impact on the country’s cryptocurrency market, which is one of the most active in the world.

Background of the Ban

Since 2018, cryptocurrency companies operating in South Korea have not been allowed to be recognized as venture firms due to concerns over the speculative nature of the market at the time. As a result, these entities have been shut out from the range of benefits enjoyed by traditional firms operating within the country’s broader startup ecosystem.

Reversal of the Ban

However, on Tuesday, that door was finally reopened as South Korea’s Ministry of SMEs and Startups passed a partial revision to the Enforcement Decree of the Special Act on Fostering Venture Businesses to bring digital asset businesses in line with other innovative sectors. Starting Sep. 16, crypto businesses would be able to apply for a venture certification under the same conditions as traditional firms.

Reason Behind the Reversal

Over the last couple of years, South Korea has softened its stance on digital assets, and instead of restricting the booming market, regulators in the country have unified under the notion that cryptocurrencies have the potential to drive innovation, attract global capital, and strengthen the nation’s competitiveness in next-generation technologies. Much of this momentum has picked up pace after pro-crypto President Lee Jae-myung was elected in June, whose administration has since prioritized digital finance reforms and pushed forward legislation supporting innovations like stablecoins.

Expected Outcome

According to regulators, once the ban is fully lifted, related sectors such as blockchain infrastructure, smart contracts, and cybersecurity are expected to grow, especially since businesses qualifying as venture firms are entitled to government subsidies such as tax cuts and financial support. With South Korea being one of the most active crypto markets across the globe, expected to grow into a $1.3 billion market by 2026, regulators hope that allowing crypto firms to access venture status could position the country to become an attractive hub for digital asset innovation.

Regulatory Reform

“This regulatory reform is designed to align Korea with global trends in digital assets and to secure future growth engines,” South Korean Minister of SMEs and Startups, Han Seong-sook, said. “We will concentrate policy efforts on fostering a transparent and responsible ecosystem that allows venture capital to flow smoothly and supports the growth of new industries.”

Investor Protection

Even as the country is fostering crypto growth, investor security remains a key focus area for the South Korean government. Over the past months, the country has ramped up efforts to keep speculative crypto trading in check. For instance, earlier this month, South Korea’s Financial Services Commission reworked the regulatory framework for crypto lending, banning high-risk leveraged loans and cash-equivalent products, and capped annual interest rates at 20%, to curb excessive speculation and safeguard investors.

Recent Actions

Meanwhile, in late August, the agency sent legal notices to local crypto exchanges mandating a temporary suspension of crypto lending services until proper regulations have been enforced. This move is part of the government’s efforts to protect investors and ensure that the crypto market operates in a safe and transparent manner. For the latest news and updates on the crypto market, visit bitpulse.