The Financial Services Commission (FSC), South Korea’s financial regulator, has provided clarity on how it will treat non-fungible tokens (NFTs) in the country. In a recent development, the FSC has issued guidelines stating that NFTs that are mass-produced, divisible, and capable of being used as payment will be considered virtual assets.
According to a report from local media outlet News1, the FSC will regulate such NFTs similarly to cryptocurrencies if they lack traits that differentiate them from virtual assets. The regulator’s decision is based on the belief that highly produced NFTs with large quantities have a high probability of being used as a payment method.
Jeon Yo-seop, the head of the FSC’s Financial Innovation Planning department, stated in an interview, “If 1 million NFTs were issued in a collection, there would be a lot of transactions. In this situation, the NFTs could be used as a payment method.”
However, the FSC acknowledged that it would conduct case-by-case reviews to distinguish between NFT collections, as there would be no absolute standard for interpreting NFTs as cryptocurrencies.
The new guidelines also suggest that NFTs could be treated as securities if they exhibit features specified in the country’s Capital Markets Act.
Additionally, the FSC has clarified that NFTs classified as virtual assets will be eligible to receive interest when deposited on exchanges. This aligns with the regulator’s previous statement in 2023, which stated that virtual assets must receive interest when deposited into crypto exchanges starting in July 2024.
While regular NFTs and central bank digital currencies (CBDCs) are excluded from this rule, the update reiterates that NFTs used as payment and issued in large quantities qualify for interest payments.
South Korea’s move to regulate mass-produced NFTs as virtual assets aims to provide a clear regulatory framework for the rapidly evolving NFT market and ensure appropriate oversight and protection for investors and users.