South Korea to Classify Some NFTs as Cryptocurrencies

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  • South Korea has released new regulations classifying some NFTs as cryptocurrencies
  • NFTs considered as crypto include those that are used to pay for goods and services
  • The country will determine NFTs’ classification on a case-by-case basis

South Korea’s financial watchdog Financial Services Commission (FSC) has unveiled new guidelines to help determine whether NFTs are cryptocurrencies or not. NFTs that fall into the crypto category include those used to pay for goods and services and those that have extremely many collectibles in one collection. The FSC wants to use the new guidelines to decide whether NFTs will be governed by the country’s Capital Market Act or the Virtual Asset User Protection Act, something that adds to the legitimacy of NFTs.

General NFTs Have Negligible Monetary Value

According to the FSC, some collectibles will be categorized as general NFTs if they’ve negligible monetary value. General NFTs will include collectibles used as event tickets and those used to prove a product’s authenticity. 

The FSC, however, disclosed that it won’t set the number of collectibles in a collection for those NFTs to be considered cryptocurrencies, saying the quantity will be determined on a case-by-case basis.

The South Korean financial regulator said it will form a special committee to help NFT issuers determine whether their collectibles are virtual assets or general NFTs. According to FSC’s Jeon Yo-seop, the change in NFT classification is meant to thwart attempts to use NFTs to circumvent “virtual asset regulations.”

NFTs Can Power Illicit Activities

The new regulations come three months after the U.S. securities watchdog head Garry Gensler met the country’s financial regulators to discuss the classification of NFTs among other topics. South Korea was in the past hesitant to classify collectibles as virtual assets saying NFTs don’t have considerable effect on financial markets.

It also comes two weeks after the US Treasury released a report noting that NFTs can be used for illicit financial activities such as money laundering and terrorism financing.

With the regulations expected to come to effect next month, it’s to be seen whether other countries will follow and whether NFT issuers in the country will comply.