• The FSC in Korea confirms that NFTs will not be regulated

  • The South Korean Financial Services Commission (FSC) reaffirmed today in a public statement that nonfungible tokens (NFT) are not virtual assets and will not be regulated.

    The decision to keep NFTs unregulated was confirmed following a review of the Financial Action Task Force’s (FATF) updated guidelines. According to the FATF’s October 28 guidance report, “NFT, or crypto-collectibles, depending on their characteristics, are generally not considered to be [Virtual Assets].”

    In a statement to reporters on November 5, an official from a branch of the FSC said:

    “We will not issue regulations for NFTs due to the FATF’s position on NFT regulation.”

    To finalize their decision, Korea’s financial regulator focused on the fact that FATF considered NFTs to be “unique, rather than interchangeable” — which is, of course, the definition of nonfungible — and that they are used as collector items rather than as a means of payment.

    Not everyone is on board. According to the South Korean newspaper Herald Corp, experts believe that NFT prices can be manipulated and used for money laundering, and that because they are not considered virtual assets, issuers will not be required to comply with anti-money laundering obligations. Koreans will also not be required to pay taxes on NFTs, despite the fact that they will be required to pay taxes on cryptocurrencies beginning in January 2022.

    Dunamu, the parent company of Upbit, which has a near-monopoly on crypto trading in the country, will almost certainly be pleased with the news.

    Dunamu and its high-profile new partner Hybe are preparing to enter the NFT arena with collectibles based on the hugely popular BTS K-pop group. The entertainment group behind the group, Hybe, recently announced that it would purchase a 2.5 percent stake in Dunamu for a reported $423.1 million. Dunamu will pay $592.4 million for a 5.6 percent stake in Hybe as part of the agreement.

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