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The benefits include tax breaks and financial support that would incentivize the industry to grow into a healthy market, contributing to South Korea’s economy. South Korea has previously excluded virtual assets from the ‘venture’ classification, which has made it hard for crypto businesses to thrive in the local market.
South Korea has reconsidered its previous decisions due to the need to stimulate the economy, as the country risks falling behind other crypto hubs, such as Hong Kong or Singapore. Governments around the world have undergone a shift in perspective, with the positive aspects of cryptocurrencies emerging to the forefront. Some governments have begun to transition to a more positive frame of reference, aiming to restrict illegal businesses while simultaneously incentivizing honest firms. There has been a growing realization that the crypto industry is here to stay and that crypto entrepreneurs deserve the same incentives as traditional businesses.
Crypto exchanges could now be classified as venture firms rather than as Virtual Asset Service Providers, opening up new opportunities for large exchanges. The changes would dramatically transform the exchange business for both local and global enterprises. South Korea aims to simplify the startup process, enabling more companies to be created from scratch. The classification of venture firms would enable startups to access loans and tax breaks easily.
The government has recognized the flaws in retarding an industry that could benefit the economy. The startup ecosystem in South Korea could be seriously handicapped compared to other countries if the government continues to cripple it with harsh regulations. The changes include South Korea categorizing crypto businesses under the tech startup category. This should be an obvious alignment because crypto is a form of technology. However, South Korea decided to give cryptocurrencies a separate category during a period when governments were required to support a fledgling business opportunity.
 
The Central Bank Digital Currency (CBDC) of South Korea was abruptly suspended to facilitate further discussions on integrating the CBDC within the traditional financial system. The move, by South Korean officials, may seem like a backward step, but it is, in fact, a step forward, as the government aims to expand its cryptocurrency market. President Lee Jae Myung has made it clear that he wishes to create a stablecoin for the local currency.
Jae Myung has compiled a comprehensive list of crypto demands that positions the local market favorably for growth, not only in digital tokens but also in blockchain startups, which could overlap with various industries, ranging from AI to manufacturing. There has been a strong push from Asian markets, such as China, to utilize technological innovation to revitalize traditional industries, including agriculture, manufacturing, and construction. Additionally, there is a growing emphasis on incorporating biodiversity and ecological awareness as key sectors that can be enhanced with blockchain technology.
Venture firms in South Korea benefit from a long list of government subsidies, including tax breaks and state-sponsored financing. The country has shifted from reverse gear to top gear within a short period. The change has come as a shock to many, especially crypto businesses, which were getting used to draconian business environments. There was the option to move shop to a more proactive country. Still, now many crypto companies may wish to enter the South Korean market, especially crypto exchanges, which could experience immediate benefits from the changes.
One particular case of businesses struggling under the previous virtual assets legislation is that of crypto company Dunamu. The company fought the previous laws in court, requesting status as a venture firm. However, Dunamu was denied the status of a venture firm and was therefore subject to a tax bill of $18 million. The new laws may significantly impact companies like Dunamu, which would benefit from tax breaks.
Source: https://zycrypto.com/south-korea-reclassifies-crypto-businesses-as-venture-firms-saving-millions-in-tax-breaks-for-crypto-sector/