The South Korean Financial Services Commission (FSC) has introduced new guidelines on NFTs, treating some as regular cryptocurrencies if unique traits are lost.
According to the guidelines, NFTs may be considered cryptocurrencies if they are infinite, standardized, divisible, or used for purchase. On the other hand, if the NFTs are not tradable and possess little to no monetary value, like receipts of a transaction or entry tickets to an event, they will be classified as ordinary NFTs.
An FSC representative noted that collections with a million or more NFTs could be traded and accepted as payment instruments like cryptocurrencies. However each case will be considered separately, and the FSC will not categorize NFTs as cryptocurrencies under the regulatory framework based on a single standard.
Furthermore, the new rules imply that if an NFT complies with certain characteristics described in South Korea’s Capital Markets Act, it can be recognized as a financial security.
These guidelines are emerging before South Korea’s new legislation on cryptocurrencies under the Virtual Asset User Protection Act, set to be implemented on July 19. This law has been passed in a bid to prevent unlawful practices in the crypto space such as manipulation of the market and fraudulent conduct.
As per the new law, crypto service providers are required to hold a large part of users’ deposits in cold wallets to safeguard the assets better and join insurance schemes to cover the users in the event of a breach.
This is among the measures the South Korean government is implementing to develop a legal structure for the crypto market. The future rules will be directed at the regulation of the issuance of crypto tokens and enhancing the quality of information provided to investors.
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