South Korean and US financial authorities are slated to engage in discussions regarding the potential recognition of non-fungible tokens (NFTs) as virtual assets.
Lee Bok-hyun, the governor of South Korea’s Financial Supervisory Service (FSS), is reportedly slated to meet with Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC), in May to address this matter.
The central concern revolves around the lack of a clear legal definition for NFTs, leading to confusion in their classification as either a technology, a virtual asset, or a security.
Notably, the exclusion of NFTs from the scope of virtual assets in the Enforcement Decree of the Virtual Asset Act in Korea, effective from July, was based on the judgment that their market risk was low, primarily due to their prevalent use for collection purposes.
However, the landscape has evolved as virtual asset prices, including Bitcoin, have recently surged, transforming NFTs into speculative commodities. Consequently, there is a growing sentiment that NFTs should be acknowledged as accountable assets alongside Bitcoin.
Complicating the classification further is the varied purposes NFTs may serve. If NFTs lack the capability to be exchanged for money, goods, or services, excluding them from the virtual asset category may be justified. Conversely, if they function as investment tools, their inclusion within the scope of virtual assets becomes a valid consideration.
The potential categorization of NFTs as virtual assets could significantly impact businesses, as obtaining a virtual asset business license would become mandatory. This process entails obtaining public certification, involving substantial costs — posing challenges, especially considering that most Web3-related businesses are startups or small-to-medium-sized companies.
While no definitive decisions have been reached yet, the discussions in May aim to bring about more clarity regarding the status of NFTs.
The discussion on NFTs will also extend to the consideration of Bitcoin ETFs. Director Lee Bok-Hyun’s upcoming talks with the SEC in Q2 2024 will delve into spot Bitcoin ETFs, exploring their intricacies and implications within South Korea’s financial regulatory landscape.
