South Korea will classify certain NFTs as regular cryptocurrencies under the Virtual Asset User Protection Act, according to a report.
South Korea will regulate NFTs that are mass-produced and used similarly to cryptocurrencies.
South Korea is intensifying its efforts to establish regulations for the virtual digital assets sector, with the Financial Services Commission (FSC) leading the task of drafting these laws. The new guidelines in Seoul will classify bulk or large-scale non-fungible tokens (NFTs) as regular cryptocurrencies under the Virtual Asset User Protection Act. This move could position South Korea as one of the first countries to clearly define the status of NFTs and their role in the Web3 sector.
NFTs are virtual assets with inherent value, supported by blockchain networks. They can represent various digital items, such as artworks, game characters, GIFs, videos, and music content. Purchasing an NFT grants the holder full ownership rights. Most NFTs are unique, which helps them retain their value. In Web3 ecosystems, such as metaverse-related games, NFTs can be traded, providing holders with immediate liquidity options.
South Korean regulators have studied NFTs extensively before issuing governance guidelines. According to a report by Yna.co.kr, “NFTs issued in large quantities or large-scale series, or those that can be exchanged with other virtual assets, have a high potential to be considered virtual assets.”
The guidelines reportedly state that NFTs issued in large quantities and intended to be used as a mode of payment, whether directly or indirectly, will be classified as ‘assets,’ putting them on par with regular cryptocurrencies.
Web3 firms dealing with NFTs are required to report any suspicious activities to the FSC.
South Korea has been researching NFTs since 2021, when it first began considering how to bring NFTs into a tax bracket.
A year later, NFTs were used as a means to fund presidential campaigns in Seoul.
Given South Korea’s friendly approach towards the digital assets sector, Binance signed an MoU with South Korea’s YG Entertainment in February 2022 to collaborate on NFTs and other web3 projects.
Recent research reports have highlighted that Asian nations like South Korea, Japan, and India represent a significant and lucrative market for metaverse gaming, where NFTs play crucial roles as in-game characters and rewards.
The South Korean government is expected to implement its ‘Virtual Asset User Protection Act’, designed to regulate the Web3 industry, by July this year.
