The South Korean government is expected to reject the continuation of designation of cryptocurrency exchanges and other blockchain projects as venture firms. The move will create problems for cryptocurrency startups as the taxes on them are expected to double in the light of this move.

The legislation was first proposed by the Small and Medium Enterprises (SMEs) Ministry of the government back in August. It called for a revision of the current designation of cryptocurrency exchanges and advised the government to remove them from the official classified list of venture firms.

According to the SMEs ministry report: “Under the new government policy, cryptocurrency exchanges that will be newly set up this month or later cannot be certified as venture firms.”

While at the time, the government was undecided about the matter, it is now learned that it will stick to the advice of the ministry and is set to degrade the status of the crypto projects and they will now be designated alongside businesses belonging to gambling, bar and entertainment industry, thus doubling the taxes. The sector is also likely to lose several other perks and financial incentives offered to the VCs and domestic small businesses.

While lobby groups are rushing to the capital Seoul to warn the government against taking such measures, the Korea Blockchain Association and other blockchain association are leading an outcry against the proposed measures.

The lack of tax benefits might also force the South Korean exchanges to move overseas, thus causing harm to the local blockchain and crypto community currently producing some of the best blockchain research and products in the world.

 

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