NFTs in South Korea Remain Unregulated But Here Is The Catch

November 5, 2021

Non-fungible tokens (NFTs) do not fall under the definition of virtual assets in South Korea, according a publication in the Korea Herald. South Korea’s Financial Services Commission (FSC) confirmed that the digital collectibles will not be regulated as such.

Citing an unnamed Financial Intelligence Unit (FIU) official, the article in the Herald said that:

“According to the basic position expressed by the International Anti-Money Laundering Organization (FATF), NFTs are not regulated,”

The FIU is South Korea’s FSC’s anti-money laundering division and the Financial Action Task Force (FATF) is the global and powerful governmental body concerned with draft finance regulation, including crypto.

Nevertheless, NFT can still become regulated in some exceptions, depending on how one interprets the FATF’s definition.

In their latest guidance, the FATF states that NFTs are not virtual assets and are not included in its regulatory framework for crypto IF used as “collectibles rather than as payment or investment.” The global task force stressed that it is up to nations to test this definition on a case-by-case basis themselves.

Although at first glance NFTs seem to only be digital collectibles in name and marketing, in reality they are a means of investment or payment, the FATF said.

According to the FIU official, regulating NFT is not yet a priority. He said:

“In order to be used as a payment method, a very large amount must be issued, but there is virtually no reason to make it an NFT that values scarcity.”

South Korea recently implemented strict rules for crypto exchanges in September, leading to dozens of firms being suspended from operating in the country.

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Author: Peter Siu

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