South Korea’s financial regulatory body, the Financial Services Commission (FSC), has released guidelines outlining the criteria for nonfungible tokens (NFTs) to be classified as virtual assets.
As reported by local media outlet News1 on June 10, the FSC will regulate NFTs in a similar manner to cryptocurrencies if they do not have distinct characteristics that set them apart from virtual assets. NFTs that are mass-produced, divisible, and usable as a form of payment will be considered virtual assets.
However, NFTs with minimal to no value, such as those used for ticketing or digital certificates, will be categorized differently as general NFTs. Jeon Yo-seop, the head of Financial Innovation Planning at the FSC, mentioned in an interview that NFT collections with high quantities could potentially serve as a means of payment, leading to increased transactions.
Despite this, the FSC emphasized that each collection of NFTs would be evaluated on a case-by-case basis, with no absolute standard for interpreting them as cryptocurrencies. Additionally, the guidelines indicated that NFTs could be classified as securities if they exhibit specific features outlined in the Capital Markets Act of the country.
In preparation for the implementation of new regulations for virtual assets in July 2024, the South Korean regulator issued various guidelines to assist stakeholders in navigating the country’s laws. The FSC stated in 2023 that virtual assets must earn interest when deposited on a cryptocurrency exchange by July. However, the law excludes regular NFTs and central bank digital currencies (CBDCs).
While regular NFTs and CBDCs are not included, there are exceptions to this rule. The recent update from the FSC reiterated statements made last year, indicating that NFTs classified as virtual assets can earn interest when deposited on exchanges, particularly those used for payment and issued in large quantities.
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