Main Points:
- Proposed amendment to reclassify crypto firms as venture businesses in South Korea, unlocking tax incentives and government funding for the first time
- Exclusion of purely token-issuance projects retains focus on genuine tech-service blockchain companies
- Alignment with President Lee Jae-myung’s pro-crypto agenda, including spot Bitcoin ETFs and a won-based stablecoin initiative
- Japan’s simultaneous moves to slash crypto capital gains taxes to 20% and reclassify digital assets under financial laws
Background: Crypto Firms Excluded from Venture Support
In 2018, South Korea amended its venture certification criteria, categorizing virtual asset trading and brokerage services alongside “high-risk” industries like gambling and nightlife. This exclusion stripped leading firms—such as Dunamu, operator of the Upbit exchange—of venture status, triggering an additional ₩24 billion ($18 million) tax bill in 2018 and blocking access to crucial R&D grants, tax relief, and credit guarantees.
Industry stakeholders criticized the blanket exclusion. They argued that conflating blockchain-technology service providers with speculative token issuers overlooked the sector’s innovation potential and growing institutional adoption. This disconnect between policy and market realities set the stage for the current reform proposal.
Proposed Amendment: Details and Criteria
On July 9, 2025, the Ministry of SMEs and Startups unveiled a partial amendment to the Special Act on Promoting Venture Businesses. Key elements include:
- Venture Certification for Crypto Firms
Companies utilizing blockchain or digital-asset technology must meet defined technical evaluation criteria—rather than simply issuing tokens—to qualify as venture businesses. Purely promotional or token-issuance projects remain excluded. - Financial Benefits Package
Certified crypto ventures will receive:- 50% corporate income tax cut for five years
- 75% reduction in business real estate acquisition tax
- Up to 70% discount on broadcast advertising fees
Government’s Pro-Crypto Strategy
President Lee Jae-myung, inaugurated in June 2025, has prioritized digital-asset policy as part of his economic agenda:
- Spot Bitcoin ETFs: Regulatory groundwork to approve physical Bitcoin ETFs by late 2025.
- National Pension Crypto Investments: Exploring lifting restrictions on pension-fund allocations, potentially channeling up to ₩1 trillion (≈ $884 million) into digital assets.
- Won-Based Stablecoin: Legislating corporate issuance of stablecoins pegged to the Korean won, enhancing domestic transaction use-cases.
These initiatives aim to position South Korea as a global digital finance hub, bridging regulatory oversight with market innovation.
Comparative Spotlight: Japan’s Crypto Tax and Regulatory Reforms
While Korea crafts venture incentives, Japan is overhauling its tax and legal framework to stimulate crypto adoption:
- Flat 20% Crypto Tax: Proposals from the Financial Services Agency would reduce the current maximum 55% progressive miscellaneous-income tax on crypto gains to a flat 20%, aligning digital-asset taxation with stocks.
Market Impact and Industry Outlook
South Korea:
- Accelerated VC Inflows: Venture status opens doors to angel-investor tax credits and domestic/international VC funding, potentially fueling a new wave of blockchain startups.
- Institutional Confidence: Tax predictability and government backing may entice traditional finance entrants—banks, asset managers, and insurers—to partner with crypto ventures.
- Global Competitiveness: By mirroring incentives in established tech sectors, Seoul bolsters its appeal relative to Singapore and Switzerland in the global crypto race.
Japan:
- Retail and Institutional Uptake: A lower, flat tax rate could reverse capital flight, encouraging onshore trading and token-swapping activity.
- ETF Market Development: Legal alignment with FIEA may finally clear the path for Bitcoin ETFs, attracting pension funds and mutual-fund inflows.
- Web3 Innovation: Regulatory clarity for security tokens and stablecoins lays groundwork for decentralized finance (DeFi) expansion and domestic tokenized asset markets.
Collectively, these reforms signal a paradigm shift in Asia’s largest digital-asset markets: moving from stringent exclusion toward structured inclusion, balancing user protection with incentives for technological advancement.
Conclusion
July 2025 marks a turning point for crypto regulation in East Asia. South Korea’s venture-status amendment reopens government support for blockchain pioneers after an eight-year hiatus, dovetailing with President Lee Jae-myung’s pro-digital-finance drive. Simultaneously, Japan’s push to slash crypto taxes to 20% and reclassify digital assets under financial law underscores a regional embrace of innovation paired with robust oversight. These complementary reforms promise to reshape capital flows, spark new venture creation, and accelerate institutional participation—setting the stage for the next frontier of blockchain-powered growth.
