NFTs
South Korea classifies selected NFTs as cryptocurrencies
South Korea’s Financial Services Commission (FSC) has revealed new regulations that classify specific non-fungible tokens (NFTs) as virtual assets, similar to cryptocurrencies.
Announced on Monday, the guidelines stipulate that NFTs that are mass-produced, divisible and can be used for payments will be subject to this new categorization.
This regulatory measure aims to provide clarity in the evolving digital asset sector and ensure that certain NFTs are governed by the same rules as traditional cryptocurrencies.
The FSC guidelines are a response to the growing use of NFTs in forms that mirror cryptocurrencies, targeting those that are interchangeable and do not have unique characteristics.
The FSC said it will analyze NFT collections on a case-by-case basis to determine their classification, indicating a personalized approach to regulation rather than a blanket policy.
This decision reflects South Korea’s recognition of the diverse functionalities of digital tokens, potentially leading to more regulated and stable NFT markets, and offering clearer direction for creators and investors.
The announcement precedes the implementation of South Korea’s comprehensive crypto regulation, the Virtual Assets User Protection Act, scheduled for July 19, 2024.
This law is designed to curb illegal activities in the crypto space and requires crypto service providers to protect users’ deposits, primarily through cold storage, and participate in insurance schemes to compensate users in the event of security breaches.