NFTs
South Korea will consider NFTs as virtual assets
South Korea’s Financial Services Commission (FSC) will consider NFTs as virtual assets from July 19th. NFTs used for payments and exchanges will be recognized and eligible to accrue interest when deposited on exchanges. The news clarifies the status of NFTs in the FSC guidelines published last year.
National governments and authorities around the world are rushing to accommodate the crypto world into their financial systems. Many are formulating new regulations, while others are reviewing existing ones. A recent example is South Korea’s FSC, the country’s financial institution that oversees its economic activities, which has released new regulations.
Last year, the FSC developed guidelines to allow the cryptocurrency market to evolve. These guidelines also include considerations for NFTs as securities. To achieve this, there are strict rules that NFT issuers must follow in accordance with the Financial Investment Services and Capital Markets Act. NFTs that do not qualify as securities will fall under the umbrella of “digital assets”.
Digital assets were a feature of the guidelines, allowing users to deposit them on exchanges and receive interest. NFTs and Central Bank Digital Currencies (CBCDs) were initially excluded from consideration as digital assets.
This year’s update, released on June 10, integrates NFTs into South Korea’s regulated digital asset category. However, this will be on a case-by-case basis. The regulator will analyze NFTs according to the following criteria – whether the tokens are available in abundance, whether they are divisible and whether they can function as a form of payment or exchange. Characteristics that discredit its acceptance as a digital asset by the FSC include: lack of transferability or payment utility and very specific use cases.
The regulations come into force on July 19th. The side effect of its implementation could cause NFT prices to rise, thanks to their new regulated status. Future developments will inform South Korean NFT enthusiasts.