The Financial Services Commission (FSC) OF South Korea has issued guidelines that categorize nonfungible tokens (NFTs) as virtual assets.
The FSC will regulate NFTs like crypto if they do not exhibit characteristics that distinguish them from virtual assets, according to a report by local media outlet News1 on June 10.
Virtual assets will be defined as NFTs that are mass-produced, divisible, and capable of serving as payment, as per the regulator.
Mass-produced NFTs for payment purposes
The treatment of NFTs with minimal to no value will be distinct. This applies to Digital Certificate NFTs or NFTs utilized in ticketing. In these instances, they are qualified as general NFTs.
Jeon Yo-seop, the head of Financial Innovation Planning at the FSC, stated in an interview that it is highly likely that large quantities of NFT collections will be utilized as payment.
The official emphasized that issuing one million NFTs in a collection would result in significant transactions. According to the official, the NFTs could be a payment method in this scenario.
Although this is the case, the FSC stated that it will differentiate collections by conducting a case-by-case review. This implies that there would be no definitive criterion for interpreting NFTs as crypto.
Additionally, the new guidelines proposed that NFTs could be classified as securities if they exhibit characteristics outlined in the country’s Capital Markets Act.
Interest may accrue to virtual asset NFTs
The South Korean regulator has issued various guidelines to assist stakeholders in navigating the country’s laws in anticipation of new regulations for virtual assets in July 2024.
The FSC stated 2023 that virtual assets must receive interest when they deposit their funds into a crypto exchange by July. Nevertheless, the regulator emphasized that the law does not encompass central bank digital currencies (CBDCs) and conventional NFTs.
Despite excluding regular NFTs and CBDCs, the rule also has exceptions. The FSC’s latest update confirms its previous declarations of the prior year, which stated that NFTs classified as virtual assets are eligible for interest payments upon deposit on exchanges.
This implies that NFTs issued in significant quantities and used as payment are eligible for interest.
