Regulation
South Korea classifies selected NFTs as cryptocurrencies
South Korea’s Financial Services Commission (FSC) has unveiled new regulations that classify specific non-fungible tokens (NFTs) as virtual assets, similar to cryptocurrencies.
Announced on Monday, the guidelines state that NFTs that are mass-produced, divisible and usable for payments will be subject to this new categorization.
This regulatory move is intended to provide clarity within the evolving digital asset industry and ensure that some NFTs are governed by the same rules as traditional cryptocurrencies.
The FSC guidelines are a response to the growing use of NFTs in ways that mirror cryptocurrencies, targeting those that are interchangeable and lack unique characteristics.
The FSC said it will review NFT collections on a case-by-case basis to determine their classification, indicating a tailored approach to regulation rather than a blanket policy.
This decision reflects South Korea’s recognition of the diverse capabilities of digital tokens, which could lead to more regulated and stable NFT markets and offer clearer direction to creators and investors alike.
The announcement comes ahead of South Korea’s implementation of its global cryptocurrency regulation, the Virtual Asset User Protection Act, on July 19, 2024.
This act is designed to curb illegal activities in the crypto space and requires crypto service providers to protect user deposits, primarily through cold storage, and participate in insurance programs to compensate users in the event of security breaches.