|Oct 03, 2018 03:49 PM||By: John Patrick Mullin | 3286 Views|
In a surprise to the industry, the government of South Korea has united with its legislative proposal to eliminate the cryptocurrency and blockchain industry from being certified as venture firms.
First introduced by SMEs (South Korea’s Ministry for Small and Medium Enterprises) and Startups in August, the amendment to the law called for Korea’s domestic blockchain industry, including cryptocurrency exchanges, to be removed from the government’s official classified list of certified venture firms.
As reported, the enactment of the proposal would mean that cryptocurrency startups and exchange platforms will connect businesses from the gambling, bar and entertainment industry. Uniquely, the sector would thereby lose tax perks including other financial incentives afforded to domestic startups and small businesses.
Immediately, some major Korean exchanges – some of the biggest in the world including UPbit and Bithumb – remain approved as venture firms but that recognition is set to terminate near the end of the year.
“The measure will control the industry as a whole,” lobby groups including the Korea Blockchain Association, Korea Industry Promotion Association and the Korea Blockchain Startup Association suggested at the time, voicing their apparent displeasure at the recommended revision to the law.
As described by Business Korea this week, the South Korean government has agreed in the proposal with its legislation in the National Assembly.
The policy, according to the report, will see cryptocurrency exchanges face the responsibility of their corporate and income taxes doubling while they will no longer serve from a 75% cut in acquisition taxes. Moreover, cryptocurrency exchanges will no longer have any rights such as credit guarantees.
“Under the new government policy, cryptocurrency exchanges that will be newly set up this month or later cannot be confirmed as venture firms,” the report added, drawing a bleak forecast for new startups entering the space.
The lack of tax benefits is definite to discourage research and development within the industry which could seek to move their base of operations to friendlier jurisdictions outside.
For instance, Korean exchange Upbit made an important 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 maintenance for over 100 cryptocurrencies at launch, chief executive Sigroo Lee had a solid explanation for the company’s expansion beyond South Korea.
Talking less than a month ago, he said:
“We felt the timing was right to grow globally despite various uncertainties surrounding the Korean market.”