South Korea will classify these NFTs as regular cryptocurrencies
South Korea is ramping up efforts to formulate regulations for the oversight of the virtual digital asset sector, with the Financial Services Commission (FSC) taking the lead in drafting these laws. Seoul’s new guidelines will see regulators classify bulk or large-scale non-fungible tokens (NFTs) as regular cryptocurrencies under the Virtual Asset User Protection Act. South Korea could become one of the first countries to clearly define NFTs, their status and their role in the Web3 sector.
NFTs are virtual assets with an underlying value. Supported by blockchain networks, NFTs can be inspired by artwork, game characters, GIFs, as well as video and music content. Purchasing an NFT gives its holder full ownership rights. Most NFTs are unique, which allows them to retain their value. In Web3 ecosystems such as metaverse-related games, NFTs can be traded, offering holders an immediate liquidity option.
South Korea’s regulators have been studying NFTs before reportedly issuing guidelines regarding their governance. “NFTs that are issued in large quantities or in large-scale series or that can be exchanged in combination with other virtual assets have great potential to be considered virtual assets,” South Korean publication Yna.co.kr said in his report.
The guidelines state that when NFTs are issued in large quantities and are intended to be used as a means of payment (directly or indirectly), they are classified as “assets,” putting them on an equal footing with regular cryptocurrencies.
Web3 companies working with NFTs have been asked to report suspicious activity to the FSC.
South Korea has been exploring NFTs since 2021, when the country first began including NFTs in a tax bracket.
A year later, NFTs were used to raise money for the presidential campaign in Seoul.
Given South Korea’s friendly attitude towards the digital asset sector, Binance signed an MoU with South Korea’s YG Entertainment in February 2022 to collaborate on NFTs and other web3 projects.
Several recent research reports have shown that the Asian countries of South Korea, Japan and India represent a large and lucrative market for metaverse gaming, with NFTs playing a crucial role as in-game characters and rewards.
The South Korean government is expected to implement the ‘Virtual Asset User Protection Act’ in July this year, which aims to regulate the Web3 industry.
