S. Korean Regulator Says NFTs Are Not Virtual Assets: Report

South Korea’s Financial Services Commission (FSC) reaffirmed its view that non-fungible tokens (NFTs) generally do not fall under the definition of virtual assets and will not be regulated as such, according to a report from the Korea Herald.

• “According to the basic position expressed by the International Anti-Money Laundering Organization (FATF), NFTs are not regulated,” the report said citing an unnamed Financial Intelligence Unit (FIU) official.
• The FIU is the FSC’s anti-money laundering division and the Financial Action Task Force (FATF) is an international governmental body that drafts finance regulation, including on crypto.
• However, the official left the door open to NFT regulation in some cases, as outlined in the FATF’s definition.
• According to FATF’s latest guidance, NFTs are not virtual assets and don’t fall under its regulatory framework for crypto as long as they are used as “collectibles rather than as payment or investment.” Countries should consider whether NFTs are covered by FATF standards on a case-by-case basis, said the task force.
• Some NFTs are only digital collectibles in name and marketing, when in reality they are being used for investment or payment, the FATF warned regulators. Other NFTs that are not virtual assets, but are digital representations of assets regulated by the FATF, the task force said.
• “In order to be used as a payment method, a very large amount must be issued, but there is virtually no reason to make it an NFT that values scarcity,” the FIU official said.
• Despite regulatory ambiguity, the NFT industry has flourished in the intellectual property-rich country, with superstar band’s BTS agency announcing plans to enter the industry yesterday.
• S. Korea implemented a stringent registration framework for crypto exchanges in September, excluding dozens of firms from operating in the country.

Read more: FATF Crypto Guidance Looks to Bring Industry in Line With Banks