South Korea will not regulate NFTs as they are not considered virtual assets

South Korea will not regulate NFTs as they are not considered virtual assets

The Financial Services Commission (FSC) has said that non-fungible tokens will not be regulated because it does not take into account NFT virtual assets.

With the explosion of the crypto market in the country, South Korea has stepped up its regulations in the digital asset space. However, the Financial Services Commission (FSC) has stated that non-fungible tokens will not be regulated because it does not take into account NFT virtual assets.

The FSC made its decision not to regulate NFTs after reviewing updated guidelines from the Financial Action Task Force (FATF), according to Cointelegraph. The updated guidance for a risk-based approach for virtual assets and virtual asset service providers dated October 28, 2021 distinguishes between cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH) ), and collectibles such as NFTs.

“Digital assets which are unique, rather than interchangeable, and which are in practice used as collectibles rather than instruments of payment or investment, may be called non-fungible tokens (NFTs) or crypto-collectibles”, said the FATF. “Such assets, depending on their characteristics, are generally not considered VA according to the FATF definition. “

But the FATF has warned that some NFTs could be considered virtual assets depending on their function. As such, some NFTS may still be covered by the updated guidelines.

“However, it is important to consider the nature of NFT and its function in practice and not the terminology or marketing terms used. Indeed, the FATF standards can cover them, whatever the terminology ”, explained the FATF. “Some NFTs which at first glance do not appear to constitute VAs may fall within the definition of VA if they are to be used for payment or investment purposes in practice.”

“The other NFTs are digital representations of other financial assets already covered by the FATF standards. Such assets are therefore excluded from the FATF’s definition of VA, but would be covered by FATF standards as a type of financial asset, ”the agency added.

The FATF explained that it is necessary to determine whether a TVN is a virtual asset or not depending on its function. “Since the VA space is changing rapidly, the functional approach is particularly relevant in the context of NFTs and other similar digital assets. Countries should therefore consider the application of FATF standards to DFTs on a case-by-case basis, ”said the FATF.

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