South Korea Says No to Crypto Exchanges as Venture Firms, Taxes to Double
The government of South Korea has refused to go back on its stance to exclude the cryptocurrency and blockchain industry from being certified as venture firms and has rejected a legislative proposal to this effect,
In fact, the position will see cryptocurrency exchanges face the burden of their corporate and income taxes doubling while they will no longer benefit from a 75% cut in acquisition taxes.
The Ministry for Small and Medium Enterprises (SMEs) had requested for Korea’s domestic blockchain industry, including cryptocurrency exchanges, to be removed from the government’s official classified list of certified venture firms. This meant that cryptocurrency startups and exchange platforms will join businesses from the gambling, bar and entertainment industry. By implication, the industry will give up tax perks and any privileges such as credit guarantees.
At present, some of the biggest exchanges in Korea including UPbit and Bithumb are still running as venture firms, a status they would by year-end.
Industry players including the Korea Blockchain Association, Korea Industry Promotion Association and the Korea Blockchain Startup Association have decried the move saying the measure will discourage the industry as a whole.
As reported by Business Korea this week, the South Korean government has agreed upon the proposal with its legislation in the National Assembly.
The report said under the new government policy, cryptocurrency exchanges that will be newly set up this month or later cannot be certified as venture firms, painting a bleak forecast for new startups entering the space.
Industry analysts say the cut in tax benefits is certain to discourage research and development within the industry which could seek to move their base of operations to friendlier jurisdictions abroad.
So far, Korean exchange Upbit made a notable expansion to Singapore in its first international foray earlier this year with operations to commence this month.
Launched a year ago by Dunamu, an affiliate of Korea’s largest messaging platform Kakao, with support for over 100 cryptocurrencies at launch, chief executive Sigroo Lee had a telling explanation for the company’s expansion beyond South Korea.
