S.Korea Regulator to Treat Some NFTs as Cryptocurrencies

Under new guidelines, South Korea's FSC will regulate NFTs deemed to have investment security traits per the Capital Markets Act, treating transferable NFTs as cryptocurrencies.

Key Insights

  • South Korea’s financial regulator issued new guidelines on regulating NFTs.
  • Certain NFTs that are mass-produced, transferable, fractionalized, or used for payments will be regulated as cryptocurrencies.
  • NFTs deemed to have investment security characteristics may be regulated under the Capital Markets Act.

SEOUL (MarketsXplora) – South Korea’s financial watchdog issued new guidelines on Monday aimed at bringing greater regulatory clarity to non-fungible tokens (NFTs), stating it will treat certain NFTs as cryptocurrencies in some cases, according to local media.

The Financial Services Commission (FSC) will regulate NFTs that are mass-produced, easily transferable, capable of being fractionalized or used for payments as cryptocurrencies, Yonhap news agency reported, citing the guidelines.

However, digital tokens that are not transferable and have little to no economic value would still be classified as standard NFTs, such as those used to prove transactions or ticket purchases, Yonhap said.

Read also! S.Korea Crypto Money Laundering Soars Nearly 50% in 2023

An FSC spokesperson told Yonhap that a collection with around 1 million nearly identical NFTs issued could potentially be deemed tradable cryptocurrency-like assets subject to existing rules.

The regulator said it would make such determinations on a case-by-case basis, rather than apply a single standard across the emerging digital asset class.

According to the guidelines, NFTs deemed to have characteristics of investment securities as defined under the Capital Markets Act could also be regulated as such, Yonhap reported.

The move by South Korean authorities aims to provide clarity as NFTs grow increasingly mainstream, with some seeing them as stable speculative vehicles while others use them to represent ownership of assets like art or property.

Read also! S.Korea Unveils Jail for Crypto Crimes Under New Rules

Global regulators have grappled with exactly how to treat NFTs, which leave permanent data trails on blockchain networks unlike traditional cryptocurrencies like bitcoin that are designed to be fungible.

South Korea has been among the more active countries in supervising the crypto sector to try to protect investors from risks.

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