- South Korea just made a 180-degree turn from its decision in 2018 to ban venture capital investments into cryptocurrency-related companies.
- The change in regulatory regime will take effect on September 16.
South Korea to Allow VC Fund Raise for Crypto Starting Next Week
According to the Seoul Economic Daily, South Korea’s Ministry of SMEs (Small and Medium-sized Enterprises) and Startups (MSS) announced on Tuesday its decision to partially reverse some provisions of the Enforcement Decree of the Special Act on Promotion of Venture Businesses. Following a cabinet meeting at the Presidential Office in Yongsan, the agency has lifted the seven-year-old restriction on VC funding for digital asset trading and brokerage firms. This now allows qualified virtual asset companies to apply for venture business certification on an equal footing with other high-growth companies.
South Korea notably banned VC funding for crypto institutions in October 2018. It aligned virtual assets in the same light as bars and gambling operations due to the significant financial risk they carry, especially given their speculative nature.
The MSS stated that the amendment reflects the changing global status of the virtual asset industry. It also cited the maturation of the domestic user protection system as another factor that influenced the revision.
The lifting of the ban will officially take effect on September 16.
Korean Won Stablecoin in the Works
The latest development comes hot on the heels of reports that the South Korean government is pushing to introduce a won-based stablecoin. Last month, local news outlet Yonhap News Agency revealed that the Financial Services Commission (FSC) has already begun working on a draft bill establishing the framework for the regulation of won-denominated stablecoins, and it expects the matter to be discussed in the National Assembly by October.
Like the USA’s GENIUS Act, the draft bill lays out the guidelines for the issuance of Korean won stablecoins, including their collateral management and internal controls. Lawmakers plan to harmonize the proposed law’s provisions under the second phase of the nation’s Virtual Assets Protection Act. The measure is a follow-up on the promise of President Lee Jae Myung, who vowed to boost South Korea’s digital economy through innovative means, including blockchain, crypto, and stablecoins.
Tether and Circle have reportedly held separate meetings with executives from some of South Korea’s largest financial institutions in light of these events. So far, the parties have remained tight-lipped on what transpired in their engagements with the nation’s top financial players. Nevertheless, these definitely paint a very bullish picture in the East Asian country’s cryptocurrency and blockchain ecosystems in the foreseeable future.
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