South Korea's financial regulator, the Financial Services Commission (FSC), has issued new guidelines to provide clarity on the regulation of Non-Fungible Tokens (NFTs). The guidelines, released on June 10, outline how NFTs will be classified and regulated, bringing much-needed clarity to the market.

Classifying NFTs

According to the guidelines, NFTs that are mass-produced, highly tradable, divisible, or used for payments will be regulated as cryptocurrencies. On the other hand, unique NFTs with little or no economic value will be classified as regular NFTs. The FSC will review each case individually, and there will be no absolute standard for interpreting NFTs as cryptocurrencies.

New Regulatory Framework

These guidelines come ahead of South Korea's first crypto-focused regulatory framework, the Crypto Asset User Protection Act, which will take effect on July 19. The law aims to eliminate illegal market activities, require cryptocurrency service providers to keep user funds in cold storage, and enroll in insurance programs for potential user compensation. This is part of a two-part legislation aimed at creating a regulatory framework for the crypto industry, with the second part focusing on standardizing crypto token issuance and information disclosure for investors.

Conclusion

South Korea's new guidelines and regulatory framework provide much-needed clarity and oversight to the NFT and crypto markets. By regulating certain NFTs as cryptocurrencies and requiring service providers to prioritize user protection, South Korea is taking a significant step towards creating a safe and transparent crypto industry."