South Korean Financial Regulator Details Classification Guidelines for NFTs as Virtual Assets
Summary:
South Korea's Financial Services Commission (FSC) has released guidelines stipulating circumstances under which nonfungible tokens (NFTs) can be deemed as virtual assets. The FSC will regulate NFTs similarly to cryptocurrencies if they don't have distinguishing features. NFTs mass-produced, divisible and usable as payment methods will be considered as virtual assets. NFTs with little to no value will be classified differently, including those used for ticketing or as digital certificates. The regulatory body has also suggested that NFTs could be regarded as a security if they exhibit features defined in the country’s Capital Markets Act.
The Financial Services Commission (FSC), the financial regulatory authority of South Korea, has outlined guidelines for classifying nonfungible tokens (NFTs) as virtual assets. News1, a local media agency, reported on June 10 that NFTs would be regulated alongside cryptocurrencies if they share similar characteristics. The FSC declared that any NFTs that are manufactured in large numbers, are divisible, and can serve as a method of payment would be classified as virtual assets. NFTs with minimal or sometimes even zero value would be classified differently. Examples include NFTs used for ticketing or as digital certificates, which will be classified as general NFTs. Jeon Yo-seop, the head of Financial Innovation Planning at the FSC, hinted at the likelihood of using high volume NFT collections as a form of payment. The official conjectured a significant number of transactions if a million NFTs were made available in a single collection, and these could be used as a payment method. However, each collection will be individually reviewed by the FSC for classification, meaning there is no universal criteria to consider NFTs as cryptocurrency. The newly issued guidelines have suggested that NFTs could also be classified as securities if they display features outlined in the country’s Capital Markets Act. In anticipation of new virtual asset regulations coming into effect in July 2024, the watchdog released several guidelines to help industry participants comprehend the legislative landscape. By July 2023, the FSC plans to have virtual assets earn interest when they are invested in a cryptocurrency exchange. Yet, the law does not extend to common NFTs and digital currencies from central banks (CBDCs). Despite this, there are exceptions, and the FSC's recent update reasserts previous statements that NFTs classified as virtual assets can earn interest when invested in exchanges. This indicates that NFTs used for payments and those produced in bulk are qualified for interest.
Published At
6/10/2024 10:38:20 AM
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