Korea Removes Crypto Exchanges From Tax Reduction Bill, Says it’s Gambling
Last week, the government of South Korea has released the draft of its tax reduction bill for startups. But, it excluded crypto businesses and alcohol distributors, claiming that digital asset trading is gambling.
The Korea Blockchain Association along with other cryptocurrency organizations have formally requested the government of South Korea to revoke its decision to exclude crypto and blockchain-related businesses from its tax reduction bill.
Local Crypto and Blockchain Firms Outraged
Local cryptocurrency exchanges and blockchain project operators specifically expressed their dissatisfaction with the fact that crypto businesses were excluded from the list alongside alcohol distributors, which demonstrated the intent of the government to acknowledge ventures in the cryptocurrency sector in the same category as alcohol vendors.
More importantly, crypto trading platform operators argued that since the country’s first cryptocurrency and blockchain legislation will acknowledge cryptocurrency exchanges as regulated financial institutions, the government should treat cryptocurrency businesses like any other financial or fintech company.
Possibly by the year’s end, cryptocurrency exchanges will be required to operate with the status of a regulated financial institution, meeting the standards established by local financial authorities pertaining to security measures, internal management systems, and transaction monitoring protocols.
Analysts have suggested that in order for crypto exchanges to comply with all of the demands requested by the Financial Services Commission (FSC), the main financial watchdog of the country, platform operators will need to allocate a significant chunk of their resources and capital to drastically enhance their platforms.
In the short-term, minor cryptocurrency exchanges may suffer from large expenditures and rigorous investigations conducted by the government. But, most exchanges in South Korea have been backed by the country’s biggest conglomerates since their early days and as such, remaining compliant with existing financial regulations will not be an issue.
The country’s largest cryptocurrency exchanges UPbit, Korbit, Gopax, Bithumb, and Coinone are backed by companies like Kakao, SKT, and Shinhan Bank, South Korea’s largest internet, telecommunications, and financial corporations.
However, despite all of the positive developments the country has seen in its local cryptocurrency sector, if the newly drafted tax reduction bill for startups is passed, it may limit the growth of crypto startups and blockchain projects in South Korea, which regional governments like Jeju Island and Busan have worked hard to support.
JoongAng, one of the largest mainstream media outlets in South Korea, reported that the exclusion of crypto and blockchain startups from the bill may lead to a decline in interest from venture capital firms and hedge funds, cutting the primary source of funding of blockchain companies.
Major blockchain and crypto associations of South Korea have sent an open letter to the government of South Korea, requesting the inclusion of cryptocurrency-related businesses in the tax reduction bill to ensure that its stance on cryptocurrencies remain in line with its previous decision to legitimize and properly regulate the digital asset market.
Crucially, companies in the cryptocurrency sector of South Korea stated that if the government fails to recognize businesses in the crypto industry as legitimate ventures and startups, it is wholly unrealistic to expect venture capital firms and even foreign companies to consider investing in local companies.
Will the Government Change its Stance?
Already, the regional government of Busan, the country’s second largest city behind Seoul, has vowed to create the next “Crypto Valley” by establishing friendly regulatory frameworks for crypto and blockchain businesses.
Given the optimistic and forward-thinking approach of regional governments towards blockchain development, it is highly likely that the government will revoke its decision and embrace companies in the cryptocurrency sector.