[THE INVESTOR] Korea’s Ministry of SMEs and Startups has reportedly invested 3.6 billion won (US$3.30 million) in cryptocurrency exchanges -- another confusing message from the government amid weeks of attempts to crack down on crypto trading.

The ministry, established in July, succeeds the former Small and Medium Business Administration, an agency underneath the Trade Ministry. It operates a 1.7 trillion won fund of funds to support startups and venture firms. 

According to the ministry on Jan. 19, 16 venture capital firms that are getting government funding have invested a combined 41.2 billion won in crypto exchanges even though the ministry’s actual investment is worth 3.6 billion won.

Upbit, the Kakao-backed exchange whose key partner is US-based Bittrex, received the largest 15.86 billion won. Others include Bithumb with 9.47 billion won, Korbit 8.68 billion won, CPDAX 7 billion won and Coinone 200 million won.

The new findings were revealed early this week by Rep. Lee Chan-yeol of the minor opposition People’s Party.

Questions are being raised about the propriety of the investments because it is directly linked to the legal basis of the government’s toughening regulations on crypto trading, including a possible shutdown of exchanges.

The ministry said there is no problem in investing in crypto-related businesses for now as they are categorized as a telecom business, not financial business.

“Financial authorities are looking into illegal activities at exchanges. Following the results, we will take proper actions,” said a ministry official, hinting that the ministry could withdraw money from the VCs.

Industry sources say some institutional investors and VCs have also launched their own reviews of crypto-related investments. But it seems difficult for them to withdraw investments as most of them have purchased stakes traded in the market.

By Lee Ji-yoon (jylee@heraldcorp.com)