New non-fungible token (NFT) regulatory framework announced by South Korea’s Financial Services Commission (FSC) Published ahead of the Virtual Asset User Protection Act scheduled to take effect on July 19, 2024, the guidelines strive to provide the expanding NFT market structure and clarity while safeguarding investors and supporting responsible innovation.
Fungibility Takes Center Stage
The FSC’s methodology revolves on the idea of fungibility, which is the capacity of an NFT to be traded for another exactly matched NFT. Mass-produced, divisible, NFTs that mostly serve as payment will be categorised as virtual assets and under laws comparable to those of cryptocurrencies.
In a provocative interview, Jeon Yo-seop, the FSC architect behind financial innovation, hinted at an amazing future: a digital vault bursting with one million NFTs, serving not only as collectibles but also as currency itself!
Still, the FSC, always the wary protector, underlined that every NFT collection will be examined like a distinct fingerprint and that there is no one-size-fits-all method to identify them as crypto.
A Spectrum Of NFT Regulation
The FSC notes the several uses for NFTs. Minimal monetary value, unique, non-divisible NFTs like those used for digital certificates or concert tickets will probably be classified as “general NFTs” and free from more stringent rules.
The rules also allow NFTs to be labelled as securities should they show traits described in South Korea’s Capital Markets Act. This sophisticated technique guarantees that the rules change with the changing character of NFTs on the digital scene.
Businesses Beware: Compliance Is Key
NFT companies operating in South Korea should closely review the FSC’s policies to ascertain whether their products fit as virtual assets. Businesses engaged in such NFTs will have to follow the Specific Financial Information Act, which controls virtual asset sale, exchange, transfer, storage, and brokerage.
Ignoring these rules could cause large fines or even criminal punishments. The FSC promises to provide consultancy services to help companies negotiate the new regulatory environment since it understands their possible complexity. This covers offering case studies and real-world examples to enable companies to boldly categorise their NFTs.
South Korea’s NFT Market Poised For Growth
With the NFT spend value forecast to rise from $938 million in 2022 to $4 billion by 2028, the NFT market in South Korea is likely to grow dramatically with a compound annual growth rate (CAGR) of 34%.
With the number of NFT owners rising from 10,000 in 2020 to 760,000 in 2021 and expected to reach 970,000 in 2024 and 1.02 million by 2025, the nation has seen an explosion in NFT adoption.
Featured image from Getty Images, chart from TradingView