South Korea's top financial regulator issued new guidelines targeting non-fungible tokens on Monday to provide regulatory clarity on NFTs.
The new guidelines are said to have stated that the Financial Services Commission (FSC) will regulate certain NFTs as regular cryptocurrencies if they are deemed to no longer possess unique qualities that distinguish them. distinguish them from cryptocurrencies.
The FSC may classify an NFT as a cryptocurrency in a regulatory context if it is mass-produced, fairly exchangeable, divisible, or used to pay for goods and services, Yonhap reported, citing the guidance.
On the other hand, digital tokens that are non-transferable and have little or no economic value would be classified as regular NFTs. An example of that would 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 NFTs were issued that could be traded and used as payment like cryptocurrency. However, the FSC said it will make distinctions through a case-by-case assessment and that there will be no absolute standard used to interpret NFTs as cryptocurrency in a regulatory context.
The FSC's new rulebook also proposes that an NFT can be classified as a financial security if it has the corresponding characteristics outlined in the country's Capital Markets Act.
New Korean cryptocurrency law
The new guidelines come ahead of South Korea's first cryptocurrency-focused regulatory framework, which will take full effect from July 19. The law, called the Virtual Asset User Protection Act, aims to aims to eradicate illegal market practices, such as using confidential information to invest in cryptocurrencies, manipulating market prices, and engaging in fraudulent transactions.
The act also requires cryptocurrency service providers to safeguard more than 80% of deposits in cold storage to protect user funds and to sign up for insurance programs to compensate potential users in the event security breach.
The new law is part of a two-part South Korean law that seeks to establish a regulatory framework for the cryptocurrency industry. The second half of the regulation, currently under development, focuses on standardizing cryptocurrency token issuance and disclosure to investors.
