According to Yonhap news agency, South Korea's top financial regulator issued new guidelines on June 10 to provide regulatory clarity on NFTs. The guidelines state that the Financial Services Commission (FSC) will regulate certain NFTs as cryptocurrencies if they no longer possess unique qualities that distinguish them from cryptocurrencies.
South Korea and the Crypto Market
According to Yonhap, the FSC may classify an NFT as a cryptocurrency if it is mass-produced, highly tradable, divisible, or used for payments for goods and services. On the other hand, non-transferable crypto tokens with little or no economic value will be classified as regular NFTs. An example of this could be an #NFT proof of transaction or an NFT ticket for a concert.
An FSC spokesperson told Yonhap that a collection of about one million issued NFTs could be bought and sold and used as a payment method like cryptocurrencies. However, the FSC will review each case and stated that there will be no absolute standard for interpreting NFTs as cryptocurrencies in a regulatory context.
Details on the Law
The new guidelines precede South Korea's first crypto-focused regulatory framework, which will fully take effect on July 19. The law, called the Crypto Asset User Protection Act, aims to eliminate illegal market activities such as using undisclosed information for crypto investments. Processes like market price manipulation and fraudulent transactions will be addressed.
The law also requires cryptocurrency service providers to keep more than 80% of user funds in cold storage and to enroll in insurance programs for potential user compensation in case of security breaches.
The new law is part of South Korea's two-part legislation aimed at creating a regulatory framework for the crypto industry. The second part of the regulation, currently under development, focuses on standardizing the issuance of crypto tokens and information disclosure for investors.
