South Korea is ramping up efforts to formulate rules to oversee the virtual digital assets sector, with the Financial Services Commission (FSC) spearheading the task of drafting these laws. Seoul’s new guidelines will result in regulators classify bulk or large scale non-fungible tokens (NFTs) as regular cryptocurrencies, under the Virtual Asset User Protection Act. South Korea could become one of the first countries to clearly define NFT the status of NFTs and their role in the Web3 sector.
NFTs are virtual assets that have an underlying value. Supported on blockchain networks, NFTs could be inspired by artworks, game characters, GIFs, as well as video and music content. The purchase of an NFT gives its holder complete ownership rights. Most NFTs are unique, allowing them to retain their value. In Web3 ecosystems such as metaverse-related games, NFTs can be traded and offers holders an immediate liquidity option.
South Korea’s regulators studied NFTs, before guidelines related to their governance were reportedly issued. “NFTs which are issued in large quantities or in large-scale series or can be exchanged in conjunction with other virtual assets, have a high 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 with the purpose of being used as a mode of payment – direct or indirect, will be classified as ‘assets’. placing them on par with regular cryptocurrencies.
Web3 firms operating with NFTs have been asked to report any suspicious activities to the FSC.
South Korea has been researching NFTs since 2021, when it first began to look into bringing NFTs into a tax bracket.
A year later, NFTs were used as a mean to bring funding to the 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 to collaborate on NFTs and other web3 projects in February 2022.
Several research reports, in recent times, have noted that the Asian nations of South Korea, Japan, and India make for a big and lucrative market for metaverse gaming, where NFTs play crucial roles as in-game characters and rewards.
The government of South Korea is expected to implement its ‘Virtual Asset User Protection Act’, aimed at regulating the Web3 industry, by July this year.
