South Korea's Financial Services Commission (FSC) has issued guidelines delineating the circumstances under which nonfungible tokens (NFTs) will be treated as virtual assets, aligning them with the regulatory framework for cryptocurrencies.

According to reports by local media outlet News1 on June 10, the FSC will regulate NFTs similarly to cryptocurrencies if they lack distinct characteristics setting them apart from virtual assets. Specifically, NFTs that are mass-produced, divisible, and usable for payments will fall under the category of virtual assets.

However, NFTs with negligible value or those employed for specific purposes, such as ticketing or digital certificates, will be classified differently as general NFTs.

Jeon Yo-seop, head of Financial Innovation Planning at the FSC, emphasized in an interview that NFT collections with large quantities are likely to be utilized as payment methods. He highlighted the potential for significant transaction volumes if one million NFTs were issued within a collection.

While the guidelines provide a framework for categorizing NFTs, the FSC indicated that determinations would be made on a case-by-case basis, signaling a nuanced approach to interpreting NFTs within the regulatory landscape.

Furthermore, the guidelines suggest that NFTs could be subject to securities regulations if they exhibit features outlined in South Korea's Capital Markets Act.

In anticipation of implementing new regulations for virtual assets in July 2024, the FSC has issued comprehensive guidelines to aid stakeholders in navigating the country's regulatory framework.

In line with previous directives issued in 2023, the FSC reiterated that virtual assets, including NFTs classified as virtual assets, must accrue interest when deposited on cryptocurrency exchanges. While regular NFTs and central bank digital currencies (CBDCs) are exempt from this requirement, exceptions apply for NFTs used for payments and issued in large quantities, making them eligible for interest on exchanges.

The FSC's guidelines provide clarity on the treatment of NFTs within South Korea's regulatory landscape, establishing parameters for their classification as virtual assets and outlining conditions for interest accrual on exchanges, reflecting the evolving intersection of blockchain technology and traditional finance.