KEY POINTS
South Korea’s Financial Services Commission (FSC) recently unveiled new guidelines aimed at regulating non-fungible tokens (NFTs).
The new guidelines explicitly state that under certain circumstances, NFTs will be subject to the Virtual Asset User Protection Act — slated to come into full force this July.
According to a local newspaper, FSC will treat NFTs like regular cryptocurrencies if they are issued in large quantities or can be exchanged with other virtual assets.
Particularly, if NFTs lose their uniqueness and non-fungible nature, they are likely to be classified as virtual assets.
The FSC’s guidelines outline specific scenarios where NFTs would be considered virtual assets. These include cases where NFTs are issued in bulk or as part of a large series, where there is a high potential for fungibility; where they can be divided and their uniqueness is significantly diminished; and where they can be used as a means of payment for goods or services.
Additionally, if NFTs can be exchanged for virtual assets or used to pay for goods and services, they will be likely regulated as virtual assets.
Despite these specific cases, the FSC plans to analyze each situation individually without strict criteria. This approach allows for flexibility in determining whether an NFT should be regulated as a virtual asset.
The regulation of NFTs has been a contentious topic within the Web3 space. Last year, China officially declared NFT theft a crime, addressing growing concerns over digital collectible fraud.
However, global regulation of NFTs remains inconsistent, with various reports highlighting both the risks and benefits associated with them.
In April, the U.S. Treasury released its first NFT risk assessment, which identified vulnerabilities to fraud, theft, and market manipulation. The report called for stronger regulations and increased awareness to protect market integrity and consumer safety.
In March, the U.S. Copyright Office and the U.S. Patent and Trademark Office (USPTO) jointly published a comprehensive report on the intersection of NFTs and intellectual property laws. This report addressed challenges and potential solutions for NFT-related issues.
In 2023, a UK Committee expressed concerns about NFT copyright infringements, the integration of NFTs into the sports industry, and NFT-related advertising activities. The report called for government intervention to protect creators and fans.
