The Financial Services Commission (FSC) stated that non-fungible tokens will not be regulated because NFTs are not considered virtual assets by the FSC.
With the country’s crypto sector expanding, South Korea has begun strengthening its laws in the digital assets space. However, the Financial Services Commission (FSC) stated that non-fungible tokens will not be regulated because NFTs are not considered virtual assets by the FSC.
According to Cointelegraph, the FSC decided not to regulate NFTs after reviewing the Financial Action Task Force’s (FATF) new rules. The October 28, 2021 Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers distinguished between cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) and collectibles such as NFTs.
“Non-fungible tokens (NFT) or crypto-collectibles are digital assets that are unique rather than interchangeable and are used as collectibles rather than payment or investment instruments,” according to the FATF. “Such assets are generally not considered VAs under the FATF definition, depending on their characteristics.”
However, depending on their role, some NFTs may be deemed virtual assets, according to the FATF. As a result, some NFTS may still be covered by the revised standards.
“But even so, it is critical to consider the nature of the NFT and its function in practise, rather than the terminology or marketing terms used.” This is because the FATF Standards, regardless of terminology, may cover them,” the FATF explained. “Some NFTs that do not appear to be VAs on the surface may fall under the VA definition if used for payment or investment purposes in practise.”
“Other NFTs are digital representations of other financial assets already covered by the FATF Standards. Such assets are therefore excluded from the FATF definition of VA, but would be covered by the FATF Standards as that type of financial asset,” the agency added.
According to the FATF, determining whether an NFT is a virtual asset or not based on its function is required. “Given the rapid evolution of the VA space, the functional approach is especially applicable in the context of NFTs and other related digital assets.” “As a result, countries should consider applying the FATF Standards to NFTs on a case-by-case basis,” the FATF stated.