Regulation
South Korea classifies some NFTs as cryptocurrencies
South Korea’s Financial Services Commission (FSC) has unveiled new regulations that classify certain non-fungible tokens (NFTs) as virtual assets, similar to cryptocurrencies.
Announced on Monday, the guidelines state 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 within 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 a way that mirrors cryptocurrencies, targeting those that are interchangeable and lack unique characteristics.
The FSC said it would review NFT collections on a case-by-case basis to determine their classification, indicating a tailored approach to regulation rather than a blanket policy.
The move reflects South Korea’s recognition of the diverse functionalities of digital tokens, potentially leading to more regulated and stable NFT markets, and providing clearer guidance for creators and investors.
The announcement comes ahead of the implementation of South Korea’s comprehensive crypto regulations, the Virtual Asset User Protection Act, scheduled for July 19, 2024.
This law aims to combat illegal activities in the crypto space and requires crypto service providers to protect user deposits, primarily through cold storage, and participate in insurance schemes for the compensation of users in the event of security breaches.