South Korea’s Financial Services Commission calls for clearer definition of digital assets and virtual assets

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The Financial Services Commission (FSC) told South Korea‘s unicameral legislature that it wants to create a distinction between digital assets and virtual assets.

Local news agency News 1 reports that the FSC believes virtual currencies and non-fungible tokens should not be tagged as digital assets. The commission is hoping that the country’s parliament will make the distinction in the incoming Digital Asset Act.

The FSC is hinging its argument on the grounds that digital assets is an umbrella term covering virtual currencies and central bank digital currencies (CBDC) and should not be used interchangeably. The regulator also cited a similar subcategorization revealed in U.S. President Joe Biden’s executive order back in March, urging parliament to ensure that South Korea’s legislation is in line with other leading jurisdictions.

“It is ambiguous whether this is a phrase in the real sense that all NFTs are included in virtual assets or a phrase with a confirmatory meaning that NFTs that meet the definition of virtual assets are virtual assets,” FSC stated.

In 2021, South Korea’s parliament formalized the term digital assets with the introduction to the Special Financial Transactions Act. Under the legislation, virtual currencies like BTC and ETH will no longer be referred to as ‘cryptocurrencies’ but will adopt the tag of ‘Digital Asset.’

The change in terminology influenced Upbit to refer to itself as a digital asset exchange, while a joint consultative body of the five largest exchanges was called the “Digital Asset Exchange Joint Consultative Body.”

There have been calls for sweeping amendments to the Digital Assets Act of South Korea in the wake of FTX’s and Terra’s collapse. Aside from changes in the definition of terms, lawmakers are pushing for “mandatory separation of deposits” to allow regulators to have greater supervisory powers over the projects in the space.

Different jurisdictions, different appellations

Financial hubs worldwide have adopted different terms for categorizing assets in the ecosystem. The Monetary Authority of Singapore (MAS) defines digital assets as any valuable item represented in computerized or digital form. When deployed on distributed ledgers, it can be termed ‘crypto assets.’

Hong Kong’s Securities and Futures Commission (SFC) adopts a similar perspective to MAS, saying that virtual assets encompass all digital representations of value which may be digital tokens or virtual currencies.

Fabian Astic, head of Digital Assets at Moody’s Investors Service, clarified that “crypto finance and cryptocurrencies are not the same as broader digital finance.” Astic noted that they are merely a category of digital finance powered by distributed ledger technology (DLT).

Watch: The BSV Global Blockchain Convention presentation, New Technologies, New Futures for Nations