The South Korean Financial Services Commission (FSC) reiterated in a public statement today that non-fungible tokens (NFTs) are not virtual assets and will not be regulated.
The decision to keep NFTs unregulated was confirmed following a review of updated guidance from the Financial Action Task Force (FATF).The October 28 FATF guidance report states that “NFTs, or crypto-collectibles, are generally not considered to be [virtual assets] based on their characteristics.”
On Nov. 5, an official from an FSC affiliate said in a statement, “Due to the FATF’s position on NFT regulation, we will not be issuing regulations for NFTs.”
South Korea’s financial regulator has focused on the fact that the FATF considers NFTs to be “unique, not fungible” – which is of course the definition of non-fungible – and finalized as collectibles rather than as a means of payment.
Not everyone agrees. Korean experts argue that NFT prices can be manipulated and used for money laundering, and since they are not considered virtual assets, issuers will not be required to comply with anti-money laundering obligations. South Koreans will also not be required to pay taxes on NFTs, although they will need to pay taxes on cryptocurrencies starting in January 2022.
Dunamu, the parent company of the Upbit cryptocurrency exchange – which has a near monopoly on cryptocurrency trading in the country – will likely be pleased with the news.
Dunamu and its high-profile new partner Hybe will enter the NFT space with a collection based on the wildly popular BTS K-pop group.Hybe, the entertainment conglomerate behind the group, recently announced that it will buy a 2.5% stake in Dunamu, reportedly worth $423.1 million. As part of the deal, Dunamu will receive a 5.6 percent stake in Hybe, valued at $592.4 million.