Nfts
South Korea issues guidelines to classify NFTs as virtual assets — TradingView News
The Financial Services Commission (FSC), South Korea’s financial watchdog, has issued guidelines clarifying when non-fungible tokens (NFTs) should be considered virtual assets. The country is preparing to implement the “Virtual Asset User Protection Law” by July 19 this year.
Under the new guidelines, NFTs that are mass-produced, divisible, and can be used as payment will be regulated in the same way as cryptocurrencies. The FSC believes that NFT collections in large quantities have a greater likelihood of being used as a means of payment, especially if there are 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 includes 1 million NFTs, it is likely that they can be used as payment. 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 crypto.
NFTs that have 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 have the characteristics specified in South Korea’s capital markets law.
The FSC previously mentioned that virtual assets must receive interest when deposited into a crypto exchange under new virtual asset rules expected to come into effect in July 2024. Although classic NFTs and digital currencies of central banks (CBDC) are excluded from this requirement, the new FSC update reiterates that NFTs classified as virtual assets can receive interest once deposited on exchanges.
Businesses handling NFTs should review the guidelines to determine whether their NFTs qualify as virtual assets. If so, they must comply with the “Specific Financial Reporting Law”, which covers the sale, exchange, transfer, storage and brokerage of virtual assets. Failure to register as a virtual asset business operator could result in criminal penalties.
The FSC offers consulting services to companies that are unsure of the classification of their NFTs and will provide examples and judgments to help companies navigate these new regulations.