South Korea classifies NFTs produced in large quantities as virtual assets

In 2023, the FSC issued rules that said NFTs might earn interest when deposited on exchanges, as they are virtual assets.

Nonfungible tokens (NFTs) are defined as digital assets according to new rules published by South Korea’s Financial Services Commission (FSC).

According to a June 10 report by local news station News1, the FSC will treat NFTs as cryptocurrencies if they don’t have any characteristics that set them apart from virtual assets.

A virtual asset is defined by the regulator as a mass-produced, divisible, and tradable NFT. There will be a change in approach for NFTs that are very worthless. Ticketing and digital certificate NFTs are subject to this. Generally speaking, they are known as NFTs.

In an interview, Jeon Yo-seop, chief of financial innovation planning at the FSC, said that receiving large numbers of NFTs as payment is quite likely.

A collection of one million NFTs would generate a lot of transactions, the source said. Here, the official thinks NFTs may work as a payment option.

In spite of this, the FSC made it clear that it would differentiate collections based on individual cases. Since this is the case, there is no hard-and-fast rule for classifying NFTs as crypto.

In addition, the new rules imply that NFTs can be considered a security if they exhibit characteristics listed in the country’s Capital Markets Act.

The South Korean regulator has released an extensive set of instructions to assist stakeholders in understanding and complying with the country’s laws regarding virtual assets, in advance of the July 2024 rulemaking.

When people put money into a cryptocurrency exchange in July 2023, the FSC said that virtual assets had to start earning interest. The authority did clarify that CBDCs and standard NFTs are exempt from the legislation.

Although most NFTs and CBDCs do not qualify, there are a few notable exceptions. Deposits of NFTs designated as virtual assets on exchanges are eligible to earn interest, as stated in the latest update from the FSC, which restates its earlier remarks from last year. So, NFTs that are issued in large numbers and utilized as payment might earn interest.

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