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South Korea Releases Guidelines to Classify NFTs as Virtual Assets — TradingView News
The Financial Services Commission (FSC), South Korea’s financial regulator, has released guidelines specifying when non-fungible tokens (NFTs) should be considered virtual assets. The country is preparing to implement the “Virtual Asset User Protection Act” by July 19 this year.
According to the new guidelines, NFTs that are mass-produced, divisible and can be used as a means of payment will be regulated similarly to cryptocurrencies. The FSC believes that NFT cashouts with large quantities have a higher probability of being used as payment, especially if they involve a large number of transactions.
Jeon Yo-seop, head of the FSC’s financial innovation planning division, said in an interview that if an NFT collection consists of 1 million NFTs, it is likely that they could be used as a payment method. However, the FSC noted that it will distinguish collections through a case-by-case review, meaning there will be no absolute standard in interpreting NFTs as cryptocurrencies.
NFTs that hold little or no value, such as those used in ticketing or digital certificates, will be treated differently and classified as general NFTs. The guidelines also suggest that NFTs could be treated as securities if they exhibit characteristics specified in South Korea’s Capital Markets Act.
The FSC has previously said that virtual assets must receive interest when deposited on a cryptocurrency exchange as part of the new rules for virtual assets that come into force in July 2024. While regular NFTs and central bank digital currencies (CBDC ) are excluded from this requirement, the new FSC update reiterates that NFTs classified as virtual assets can receive interest once deposited on exchanges.
Companies that handle NFTs should review the guidelines to determine whether their NFTs qualify as virtual assets. If so, they must comply with the “Specific Financial Information Act,” which regulates the sale, exchange, transfer, storage and brokerage of virtual assets. Failure to report yourself as a virtual asset trader could result in criminal sanctions.
The FSC offers consultancy services for companies unsure about the classification of their NFTs and will provide examples and case judgments to assist companies in navigating these new regulations.