South Korea is stepping up efforts to formulate rules to oversee the virtual digital asset sector, with the Financial Services Commission (FSC) leading the task of drafting those laws. Seoul’s new guidelines will result in regulators classifying bulk or large-scale non-fungible tokens (NFTs) as ordinary cryptocurrencies, under the Virtual Asset User Protection Act. South Korea could become one of the first countries to clearly define the NFT status of NFTs and their role in the Web3 sector.
NFTs are virtual assets that have an underlying value. Supported on blockchain networks, NFTs can be inspired by artwork, game characters, GIFs, as well as video and music content. Buying an NFT gives its owner full ownership rights. Most NFTs are unique, which allows them to retain their value. In Web3 ecosystems such as games connected to the metaverse, NFTs are tradable and offer holders an instant liquidity option.
South Korean regulators studied NFTs before guidelines were reportedly issued regarding their management. “NFTs that are issued in large quantities or in large-scale series, or 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 its report.
The guidelines reportedly state that NFTs, when issued in large quantities and for the purpose of being used as a means of payment – directly or indirectly – will be classified as ‘assets’. putting them on par with ordinary cryptocurrencies.
Web3 companies working with NFTs are asked to report any suspicious activity to the FSC.
South Korea has been investigating NFTs since 2021, when it first began considering bringing NFTs into the tax bracket.
A year later, NFTs were used as a means of financing presidential campaigns in Seoul.
Given South Korea’s friendly approach to the digital asset sector, Binance signed a Memorandum of Understanding with South Korea’s YG Entertainment to collaborate on NFTs and other web3 projects in February 2022.
Several research reports, in recent times, have noted that the Asian countries of South Korea, Japan and India constitute a large and lucrative market for metaverse gaming, where NFTs play key roles as game characters and rewards.
The South Korean government is expected to implement its ‘Virtual Property User Protection Act’, aimed at regulating the Web3 industry, by July this year.
