South Korea Classifies Mass-Produced NFTs as Virtual Assets

According to the Financial Services Commission’s (FSC) 2023 guidelines, NFTs deemed virtual assets can accrue interest when deposited on exchanges.

South Korea’s Financial Services Commission (FSC) has issued new guidelines clarifying the circumstances under which nonfungible tokens (NFTs) can be categorized as virtual assets.

As reported by local media outlet News1 on June 10, the FSC plans to regulate NFTs like cryptocurrencies if they lack distinct characteristics separating them from virtual assets.

The regulator specifies that NFTs which are mass-produced, divisible, and usable as payment will be classified as virtual assets.

Mass-Produced NFTs May Be Utilized for Payments

NFTs with minimal to no value, such as those used in ticketing or as digital certificates, will be treated differently and classified as general NFTs.

Jeon Yo-seop, head of the FSC’s Financial Innovation Planning, indicated in an interview that NFT collections with large quantities are likely to be used for payments.

He pointed out that a substantial number of transactions would occur if a collection contained a million NFTs, making them a viable payment method.

Nonetheless, the FSC emphasized that each NFT collection will be reviewed on a case-by-case basis, meaning there will be no absolute standard for interpreting NFTs as cryptocurrencies.

Additionally, the guidelines suggest that NFTs may be considered securities if they exhibit features outlined in South Korea’s Capital Markets Act.

Virtual Asset NFTs Eligible for Interest

As South Korea prepares to implement new rules for virtual assets in July 2024, the FSC has issued several guidelines to help stakeholders understand the country’s laws.

In 2023, the FSC stated that virtual assets deposited into crypto exchanges must earn interest by July. However, this law excludes regular NFTs and central bank digital currencies (CBDCs).

While regular NFTs and CBDCs are not included, exceptions do exist. The FSC’s recent update reiterates that NFTs classified as virtual assets can earn interest once deposited on exchanges.

This means NFTs used for payment and issued in large quantities will be eligible for interest.