South Korea’s financial regulatory body, the Financial Services Commission (FSC), has released guidelines outlining the criteria for classifying nonfungible tokens (NFTs) as virtual assets.
As reported by local media outlet News1 on June 10, the FSC will apply similar regulations to NFTs as it does to cryptocurrencies, unless they demonstrate unique characteristics that set them apart from virtual assets. NFTs that are mass-produced, divisible, and can be used for transactions will be categorized as virtual assets.
However, NFTs with little to no inherent value, such as those used for ticketing or digital certificates, will be treated differently and classified as general NFTs.
Jeon Yo-seop, head of Financial Innovation Planning at the FSC, mentioned in an interview that collections of NFTs with high quantities could potentially serve as a means of payment. He explained that if one million NFTs were issued in a collection, it could lead to numerous transactions, making them a viable payment option.
Despite this, the FSC emphasized that each collection of NFTs will be reviewed on a case-by-case basis, indicating that there is no fixed standard for interpreting NFTs as cryptocurrencies.
Additionally, the new guidelines suggested that NFTs could be considered as securities if they exhibit certain 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 has issued a range of guidelines to assist stakeholders in understanding the country’s laws.
In 2023, the FSC announced that virtual assets must earn interest when deposited in a cryptocurrency exchange by July. Notably, this rule does not apply to regular NFTs or central bank digital currencies (CBDCs).
While regular NFTs and CBDCs are exempt from this requirement, there are exceptions. The recent update from the FSC reaffirms its stance from the previous year that virtual asset NFTs can accrue interest once deposited on exchanges, particularly those used for payments and issued in large quantities.