South Korea’s financial regulator, the Financial Services Commission (FSC), has published…
South Korea’s financial watchdog, the Financial Services Commission (FSC), has issued guidelines clarifying when non-fungible tokens (NFTs) can be treated as virtual assets.
On June 10, local media outlet News1 reported that the FSC would regulate NFTs in the same way as cryptocurrencies if they do not possess characteristics that distinguish them from virtual assets.
According to the regulator, NFTs that are mass-produced, divisible, and can be used for payment purposes will be considered virtual assets.
Mass-produced NFTs can be used for payments
NFTs with little or no value will be treated differently. This applies to NFTs used for tickets or NFTs for a digital certificate. In these cases, they are classified as generic NFTs.
Jeon Yeo-seop, head of financial innovation planning at FSC, said in an interview that it is very likely that NFT collections will be used in large quantities as a means of payment.
The official pointed out that there would be a lot of transactions if 1 million NFTs were issued in the pool. In this case, the manager believes that NFTs could be used as a means of payment.
However, the FSC indicated that it would differentiate the groups by examining each case individually. This means that there will be no absolute standard for interpreting NFTs as cryptocurrencies.
Additionally, the new guidelines also suggest that NFTs could be treated as securities if they have characteristics specified in the country’s capital markets law.
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Virtual Asset NFTs Can Earn Interest
In preparation for the implementation of new rules for virtual assets in July 2024, the South Korean regulator has issued various guidelines to help stakeholders navigate the country’s laws.
In 2023, the FSC said that by July, virtual assets should earn interest when depositing their funds on a cryptocurrency exchange. However, the regulator clarified that the law does not include classic NFTs or central bank digital currencies (CBDCs).
Although classic NFTs and CBDCs are excluded, there are also exceptions to the rule. The new FSC update reiterates its previous statements from last year that NFTs classified as virtual assets can earn interest once deposited on exchanges.
This means that NFTs used as a means of payment and issued in large quantities are eligible for interest.
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