HomeNewsTake a Look: How Korea Virtual Asset Law Changes NFT Regulations

Take a Look: How Korea Virtual Asset Law Changes NFT Regulations

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  • New guidelines classify some NFTs as virtual assets, requiring business reporting.
  • Infinite Block Korea joins XRPL as a validator, increasing institutional interest.

New rules defining whether non-fungible tokens (NFTs) constitute virtual assets have been released, with Korea’s ‘Virtual Asset User Protection Act’ going into force on July 19. This is a big regulatory change meant to give users in the quickly changing digital asset market security and clarity.

Previous Announcements and Principle Maintenance

Korea’s financial regulators have previously ruled that NFTs are not virtual assets under the Virtual Asset User Protection Act’s Enforcement Decree.

Though this idea is mostly the same, NFTs that show traits similar to virtual assets can now be categorized as such. firms issuing these NFTs must therefore register as virtual asset firms with the authorities.

Financial Services Commission (FSC) published comprehensive recommendations on June 10. These rules prohibit the categorization of common NFTs traded for content collection as virtual assets.

Understanding the Characteristics of NFT

The law applies differently to confusing NFTs depending on their substance, which is assessed as securities first and subsequently as virtual assets.

NFT classification as securities is determined in accordance with the ‘Token Securities Guidelines’ released by financial regulators in February of last year.

The Capital Markets Act defines rights acquired by an investor as securities, and in such case, the relevant rules apply regardless of form or technology.

New rules for deciding if an NFT is a virtual asset focus on things like high fungibility, weaker uniqueness, use as a payment method, and the ability for anonymous people to trade them.

NFTs, for example, are considered virtual assets primarily focused on market profit if they are issued in huge quantities or in series that reduce their uniqueness. Moreover, NFTs that are able to be split into tiny pieces become virtual assets and lose their distinctiveness.

In addition, NFTs produced just for the purpose of exchanging with other virtual assets—apart from NFT purchases made with virtual assets on marketplaces—are deemed virtual assets.

These rules, underlined by Jeon Yo-seop, head of the Financial Innovation Planning Division of the FSC, seek to stop NFTs from being utilized to get around virtual asset laws. Businesses handling NFTs have to confirm their status and adhere to the “Specific Financial Information Act.”

Reporting and Compliance 

‘Specific Financial Information Act’ requires companies handling NFTs recognized as virtual assets to record their activities. Crimes may follow failure to report. Enterprises should consult financial authorities in ambiguous situations.

On the other hand, an ETHNews report has, in the meantime, noted growing institutional interest in the XRP Ledger (XRPL). Significantly, Infinite Block Korea has signed on as a validator.

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Syofri is an active forex and crypto trader who has been diligently writing the latest news related to the digital asset sector for the past six years. He enjoys maintaining a balance between investing, playing music, and observing how the world evolves. Business Email: info@ethnews.com Phone: +49 160 92211628