South Korea is stepping up efforts to formulate rules to oversee the virtual digital asset sector, with the Financial Services Commission (FSC) leading the task of crafting such laws. Seoul's new guidelines will see regulators classify large-scale or large-scale non-fungible tokens (NFTs) as mainstream cryptocurrencies, under the Virtual Asset User Protection Act. South Korea could become one of the first countries to clearly define the state 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 artwork, game characters, GIFs, as well as video and music content. Buying an NFT gives its holder full ownership rights. Most NFTs are unique, allowing them to retain their value. In Web3 ecosystems such as metaverse-related games, NFTs are tradable and offer holders an immediate liquidity option.
South Korean regulators looked into NFTs, before related guidelines were reportedly issued by their government. “NFTs that are issued in large quantities or in large-scale series or that can be exchanged together with other virtual assets have a high potential to be considered virtual assets,” said South Korean publication Yna.co.kr in your report.
The guidelines state that NFTs, when issued in large quantities and for the purpose of being used as a means of payment, either directly or indirectly, will be classified as “assets”. putting them on par with mainstream cryptocurrencies.
Web3 companies dealing with NFTs have been asked to report any suspicious activity to the FSC.
South Korea has been investigating NFTs since 2021, when it began studying whether to incorporate NFTs into a tax bracket.
A year later, NFTs were used as a means of financing presidential campaigns in Seoul.
Considering South Korea's friendly approach towards the digital asset sector, Binance signed a memorandum of understanding with South Korea's YG Entertainment to collaborate on NFT and other web3 projects in February 2022.
Several research reports in recent times have pointed out that the Asian nations of South Korea, Japan and India constitute a large and lucrative market for metaverse games, where NFTs play a crucial role as characters and rewards in the game
The South Korean government is expected to implement its “Virtual Asset User Protection Act”, aimed at regulating the Web3 industry, in July this year.
