South Korea Lifts 7-Year Ban on Venture Capital Investment in Crypto Firms

South Korea is set to lift its long-standing ban on venture capital investment in crypto-asset businesses as of September 16, ending restrictions imposed since October 2018.

The Ministry of SMEs and Startups says the change reflects shifts in the global digital asset sector and aims to promote industries built on blockchain and crypto technology.

Previously, crypto trading and brokerage firms were grouped under “restricted risk businesses” alongside nightclubs and casino operators, barring them from accessing VC funding.

DAXA (Digital Asset eXchange Association) Vice Chairman Kim Jae-jin called the policy reversal a potential “turning point” for Korea’s crypto industry.

The intervention follows earlier proposals in July to amend the Act on Special Measures for the Promotion of Venture Businesses so that crypto firms may register as venture companies and thus qualify for tax breaks, financial support and regulatory benefits.

Those perks include a 50 percent corporate income tax cut for five years, steep real estate purchase tax reductions, and discounts on ad-spend.

Korea’s regulatory environment has been shifting rapidly. The Financial Services Commission has recently imposed caps on crypto lending, setting interest rates at around 20 percent and banning leveraged loans, and required trade platforms to educate first-time borrowers through suitability assessments provided by DAXA.

At the same time, regulators now penalize market manipulation, false information, and cross-border arbitrage schemes, signaling tougher enforcement. Draft laws for stablecoins are expected by 2025, and Korea will adopt the OECD’s CARF framework in 2026 to boost cross-border transaction transparency.

The move has stirred debate.

Lee Eok-won, nominee to head the FSC, has drawn sharp criticism for dismissing cryptocurrencies as lacking intrinsic value, arguing their volatility undermines their role as currency or store of value. Industry figures have pushed back, pointing out growing global adoption and real token-driven business models.

Dunamu, South Korea’s leading blockchain-fintech conglomerate and parent of Upbit, said the policy reversal aligns with its ambition to build “the next layer of financial infrastructure” on trust. CEO Oh Kyoung-suk emphasized that Korea must now transform from reacting to crypto trends to leading Web3 innovation globally.

For US and EU observers, this is more than regulatory housekeeping. Korea had long treated the crypto sector as high-risk rather than innovation-led.

The changes now put it among jurisdictions granting crypto firms access to institutional support and funding incentives, a contrast with more cautious or slower-moving regions. Similar reforms are underway in Singapore and the EU, but Korea’s blend of incentives, oversight, and enforcement make it notable.