First revealed by the South Korea’s Ministry for small and Medium Enterprises [SME’s] and Startups in Aug., the revision to the law required South Korea’s domestic blockchain businesses, along with cryptocurrency exchanges, to be moved from the government’s official classified list of certified venture companies.
However, as per a recent report at that time, the enactment of the proposal would mean that cryptocurrency startups and exchange platforms can be a part of businesses from the gambling, bar and show biz. Quite merely, the sector would thereby lose tax perks and different monetary incentives afforded to domestic startups and small businesses.
Presently, several of major Korean exchanges – some of the largest within the sector including UPbit and Bithumb – stay certified as venture companies but that recognition is ready to expire close to the end of the year.
“The legislative would discourage the businesses as a whole,” lobby clusters including the Korean Blockchain Association, Korea Promotion Association along with the Korean Blockchain Startup Association warned at the time, expressing their obvious dissatisfaction at the planned revision to the law.
In line with the Business Korea this week, the South Korea government has supported the proposal with its legislation within the National Assembly.
The policy, in line with the report, would see cryptocurrency exchanges face the burden of their company and income taxes doubling while they’ll no longer enjoy a 75 percent cut in the acquisition taxes. Further, cryptocurrency exchanges would no longer have any privileges like credit guarantees.
“Under the new government policy, cryptocurrency exchanges that would be established by this month or later would not be certified as venture companies,” the report added, painting a bleak forecast for new startups coming into the sector.
The lack of tax advantages is definitely to discourage the analysis and development within the ecosystem that would seek to move their base of operations to friendlier jurisdictions abroad.
For instance, Korean exchange Upbit created a notable growth to Singapore in its 1st international foray earlier this year with operations to start this month.
Earlier Dunamu which is an affiliate of South Korea largest electronic communication platform ‘Kakao’, with support for over a hundred cryptocurrencies at launch, CEO ‘Sigroo Lee’ had a telling explaination for the company’s growth beyond South Korea.
Stating further, he stated:
“We felt the timing was right to expand globally despite numerous uncertainties within the Korean market.”