by Cindy Huynh
Although the South Korean Government is keen to improve blockchain regulations, they do not express the same sentiment towards the cryptocurrency industry. According to an article published by Business Korea on October 1, 2018, the South Korean Government decided to deny cryptocurrency exchanges from venture firm certification, which will lead to an increase in taxes for these companies.
Cryptocurrency Exchanges Incur Double Corporate and Income Tax
From October 2018 onwards, any South Korean cryptocurrency exchange can no longer receive venture firm certification. As for cryptocurrency exchanges with existing certifications, the Government policy will apply once their certification expires. There are currently many popular certified exchanges operating in South Korea such as Bithumb, UPbit, and Coinone, where their certification expires towards the end of 2018.
Due to the new law, cryptocurrency exchanges will face an increase in double when it comes to corporate and income taxes. They are also no longer able to access a 75 percent cut in acquisition tax and any additional privileges concerning funding and credit guarantees will also be cut.
The cryptocurrency exchanges are concerned that the new policy will not only increase their costs but also decrease any potential investment opportunities. The Government policy may also lead to a general decline in the growth of South Korea’s domestic blockchain and cryptocurrency industry.
Government Policy Will Hamper the Development of Blockchain Technology
In September 2018, Business Korea reported that the Ministry of Science and Information Communications Technology (ICT) is keen to increase the growth for domestic blockchain industry by pledging Government support for blockchain-related companies. While the Government is keen to improve blockchain regulations, there is a general concern that their new policy concerning cryptocurrency exchanges will significantly impact the South Korean blockchain industry.
“The measure implies that the Government is regarding not only cryptocurrency exchanges but also every blockchain-related firm and business as gambling,” said an industry source to Business Korea. “The measure will hamper blockchain technology development and developer recruitment for the growth of the blockchain industry.”
There is an overwhelming fear that South Korea’s new policy will damage the blockchain industry as it may face the same consequences as their domestic gaming industry. The South Korean gaming industry previously had strong growth and was one of the country’s primary digital content exports.
However, due to the shutdown law that prevented people below 16 from accessing online games for six hours from midnight, the gaming industry has struggled to compete against Chinese companies due to the inability to attract and recruit talented developers.