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South Korean financial regulators have said NFTs are not subject to the same regulations as crypto assets, a ruling that could buoy token issuers and blockchain gaming companies.
According to News1, the Financial Services Commission (FSC), the country’s top regulator, stated that “after CBDCs,” NFTs will also be “excluded from” the “lists of virtual assets.”
The FSC has previously drawn up separate regulations for CBDCs. Lawmakers have also created legislation that distinguishes digital fiat from tokens such as Bitcoin (BTC).
The Virtual Asset User Protection Act defines cryptoassets as “electronic tokens that have economic value and can be traded or transferred electronically.”
Some argued that this wording does not clarify whether NFTs can legally be considered crypto-assets.
In the past, gaming regulators have refused to license video games that use NFTs.
Critics claim this has effectively blocked the progress of blockchain gaming in the country.
However, the FSC claimed that as NFTs are ‘unique and irreplaceable’ they pose a ‘limited’ risk to the financial system.
The regulator ruled that most NFTS are “traded primarily for collection purposes,” unlike cryptocurrencies – which it said are mainly used as speculative instruments.
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NFTs are not covered by South Korea’s crypto law – but there are exceptions
Despite the declaration, not all NFT issuers will be affected by the new ruling. The supervisor added a number of comments to his statement.
It was explained that some NFTs could still be considered “virtual assets” under certain circumstances.
Namely, this includes NFTs that are “issued in large quantities, like typical virtual assets, and traded in a fungible manner.”
NFTs that “can be used as a means of payment for specific goods or services” will also be classified as cryptoassets.
Moreover, the FSC has also ruled that banks holding the fiat of crypto exchange users must pay interest on deposits.
Previously, the Virtual Asset User Protection Act required virtual asset operators to segregate users’ deposits from their own assets and use custodial services.
But the new decree requires exchanges to use banks as custodians. And it dictates that banks must pay interest on fiat holdings.
The FSC further told crypto business operators to “store more than 80% of their assets in cold wallets.”