The Financial Services Commission (FSC) of South Korea has issued guidelines clarifying the treatment of nonfungible tokens (NFTs), categorizing them as virtual assets under certain conditions. According to the guidelines published in 2023, NFTs will be considered virtual assets if they lack distinctive traits that differentiate them from traditional cryptocurrencies.

In line with these guidelines, the FSC will regulate NFTs similarly to cryptocurrencies if they possess characteristics such as mass production, divisibility, and usability as a means of payment. NFT collections that meet these criteria could potentially be used for transactions and payments, akin to cryptocurrencies.

However, NFTs with little to no inherent value, such as those used for ticketing or digital certificates, will be classified differently as general NFTs. The distinction between mass-produced NFTs and those with limited utility is crucial in determining their regulatory treatment.

Jeon Yo-seop, head of Financial Innovation Planning at the FSC, emphasized the likelihood of NFT collections with high quantities being utilized as payment methods due to their potential for significant transaction volumes. However, the FSC will evaluate each collection on a case-by-case basis, ensuring there is no absolute standard for interpreting NFTs as cryptocurrencies.

Additionally, the guidelines suggest that NFTs could be classified as securities if they exhibit features specified in the country's Capital Markets Act, further highlighting the regulatory complexity surrounding these digital assets.

In preparation for implementing new rules for virtual assets in July 2024, the FSC has issued various guidelines to assist stakeholders in navigating the country's regulatory landscape. Notably, the guidelines mandate that virtual assets, including qualifying NFTs, must receive interest when deposited into cryptocurrency exchanges.

While regular NFTs and central bank digital currencies (CBDCs) are excluded from this requirement, exceptions apply to NFTs classified as virtual assets, allowing them to receive interest when deposited on exchanges. This regulatory framework aims to provide clarity and oversight in the burgeoning NFT market, ensuring compliance with existing financial regulations while fostering innovation in the digital asset space.