South Korea to Treat Select NFTs as Regular Cryptocurrencies Under Virtual Asset User Protection Act: Report

South Korea will regulate NFTs that are mass produced and are used in a similar manner as cryptocurrencies.

Written by Radhika Parashar, Edited by David Delima | Updated: 12 June 2024 12:59 IST

South Korea to Treat Select NFTs as Regular Cryptocurrencies Under Virtual Asset User Protection Act: Report

Photo Credit: Pixabay/ Big_Heart

Web3 firms have been asked to report suspicious activity to the FSC

Highlights

NFTs can be traded and offer holders an immediate liquidity option
Most NFTs are unique, allowing them to keep their value intact
NFTs could be inspired by artworks or game characters

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.

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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.

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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.

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Further reading: Cryptocurrency, NFT, South Korea, Regulation, Web3 Laws

Radhika Parashar

Email Radhika

Radhika Parashar is a senior correspondent for Gadgets 360. She has been reporting on tech and telecom for the last three years now and will be focussing on writing about all things crypto. Besides this, she is a major sitcom nerd and often replies in Chandler Bing and Michael Scott references. For tips or queries you could reach out to her at RadhikaP@ndtv.com. More