Author: Zen, PANews
After 7 years, South Korea's virtual asset companies have finally regained their "venture enterprise" status and can enjoy support such as venture capital, technology guarantees and policy financing as technology-based start-ups and growth companies.
Opening the door to crypto companies is the amendment to the "Special Act on Venture Business Cultivation," approved by the Ministry of Small and Medium Enterprises and Venture Capital and the Cabinet on September 9. The amendment removes "blockchain/virtual asset (cryptocurrency) trading and brokerage" from the list of "restricted/prohibited investment" industries and will officially take effect on September 16.
7-year ban and the near disappearance of South Korean crypto startups
In October 2018, the South Korean government, in an effort to curb speculation, protect retail investors, and maintain financial stability, included virtual asset-related businesses in the list of "restricted/limited industries" under the "Enforcement Order of the Special Act on the Cultivation of Venture Companies." Similar to the inclusion of nightclubs and casinos in similar restricted industries, regulators at the time considered cryptocurrencies "high-risk, non-authorizable areas."
At the time, the South Korean government’s strict regulation had its inherent rationale. During the global ICO boom, numerous cases of “ICO fraud” and “fake projects” emerged in South Korea, resulting in losses for thousands of South Korean retail investors.
For example, a company called Shinil Group launched the "Shinil Gold Coin," promising buyers a massive amount of gold recovered from a sunken Russian ship. The token attracted $53.7 million in investment from approximately 100,000 South Korean investors over a period of over a year. However, the company's CEO later admitted that there was "no conclusive evidence that the ship carried anything of value," and the ICO scam cost over 2,600 investors at least $8 million.
Similar incidents have emerged one after another, involving amounts ranging from hundreds of thousands to millions of dollars, exacerbating the public and government's negative perception of "crypto speculation". This has also become one of the main reasons for South Korea's tightening regulations and marginalizing the virtual asset industry.
It should be pointed out that although cryptocurrency-related start-ups are not completely banned at this time, their inclusion in the restricted industries carries a label of high risk and distrust, and due to the lack of tax, loan guarantees, and policy funding support, they are in a significantly weaker position compared to industries such as artificial intelligence and biomedicine.
According to Tracxn data, as of July 23rd this year, only one new blockchain startup has been established in South Korea. In 2018, 170 blockchain startups were established in South Korea, the highest number of startups established in a decade. Furthermore, over 100 blockchain startups were established in 2021 and 2022, during the crypto bull market and the lingering momentum of the sector.
In addition, as of July 2025, South Korean blockchain technology companies raised a total of US$13.3 million in four rounds of equity financing, while in the same period last year, South Korean blockchain technology companies had raised US$32.3 million in 17 rounds of financing - a year-on-year decrease of 58.82%.
New policy motivation: Improvement of regulatory system and digital asset trends
In an official announcement released by the Ministry of Small and Medium Enterprises and Venture Capital, it was clearly stated that the newly revised "Venture Enterprise Act Enforcement Decree" aims to, on the one hand, establish a digital asset ecosystem that aligns with global trends and lays the foundation for fostering innovative industries, and, on the other hand, to collaborate with financial authorities to establish a transparent market order and prioritize user protection. These two points, respectively, point to the increasingly intense global trend of virtual assets and the need for cryptocurrency market regulation and investor protection.
Han Sung-sook, Minister of SMEs and Startups, a key figure in this revision, believes that this regulatory reform aims to align South Korea with global digital asset trends and secure future growth engines. She stated: “We will focus policy efforts to create a transparent and responsible ecosystem that allows venture capital to flow smoothly and supports the development of emerging industries.”
It can be seen that this policy relaxation is not only due to the significant improvement in the global status of the digital asset industry, but is also closely related to South Korea’s increasingly mature regulatory environment. In 2021, South Korea revised the "Specific Financial Information Act" and introduced a virtual asset enterprise reporting system. Virtual asset service providers were included in AML/KYC obligations similar to financial institutions; the "Virtual Asset User Protection Act" which came into effect in 2024 gave financial regulatory agencies substantive supervision, inspection and sanction powers, and stipulated a series of specific obligations to protect user assets and prevent improper transactions.
The revision of the two key laws has filled the legal and regulatory gaps in the areas of "anti-money laundering supervision" and "user protection/market order", weakening the original policy logic of "lack of supervision and a one-size-fits-all approach" and transforming the existing regulatory capacity into sufficient to undertake industry support.
The ban is lifted, and South Korean crypto VC may usher in a new era
Lifting the restrictions will undoubtedly inject new vitality into South Korea's crypto industry.
In the future, crypto startups will have easier access to domestic venture capital and government support, reducing financing costs and difficulty, creating new early-stage financing opportunities for areas including DeFi and blockchain infrastructure, and accelerating the growth of their domestic blockchain industry and expanding their overseas influence.
South Korean crypto venture capital firms can also free up their hands and may deploy capital more actively, expanding investment in early-stage DeFi, blockchain infrastructure, and infrastructure projects. Among them, VCs worth noting include:
Hashed, one of South Korea's most influential and publicly focused early-stage blockchain/cryptocurrency venture capital firms, is headquartered in Seoul with operations in Silicon Valley and Singapore. Hashed has long been involved in major global and local projects (its official website and portfolio pages list chains/projects like Aptos and Injective), and also organizes hackathons and ecosystem-building activities in South Korea. It stands as a key capital promoter of the South Korean Web3 ecosystem, exemplifying the integration of community-investment and investment.
Dunamu & Partners, the investment subsidiary of Upbit's operator, Dunamu, publicly boasts a sizeable external investment portfolio, encompassing blockchain/FinTech and broader tech startups. As a leading exchange operator, Dunamu could potentially provide market liquidity support to projects through its strategic investor status.
Kakao Ventures, a venture capital firm within the Kakao family, has long been involved in strategic investments in blockchain and payment scenarios. Leveraging Kakao's traffic and the Kaia ecosystem, it provides investment projects with access to data, underlying blockchains, and commercialization channels. For blockchain projects seeking to establish themselves in South Korea, the Kakao family serves as a crucial strategic capital source and ecosystem gateway.
Furthermore, South Korea's financial system and major tech conglomerates are also accelerating their investments in the crypto space. KB Investment, a banking and institutional investment platform, leverages its financial strength, compliance, and risk management capabilities to provide portfolio companies with the institutional capital and access resources necessary for long-term growth. Samsung Next, Samsung's strategic investment arm, renowned for its industrial-grade technology and market collaboration, offers technical support, global resources, and ecosystem-level partnership opportunities to blockchain infrastructure and application projects.
