South Korea’s financial watchdog will not venture into the non-fungible tokens (NFTs) space. The Financial Services Commission (FSC) will refrain from regulating NFTs as they don’t qualify as virtual assets, the watchdog recently revealed.
Regulators globally are keeping an eye on NFTs as their values and market skyrocket. According to CryptoSlam, $13.4 billion worth of NFTs have been sold. However, not many regulators have revealed a stand on NFTs. The Financial Action Task Force (FATF) recently issued guidance that included NFTs for the first time, which effectively excluded them from being classified as virtual assets.
In its guidance, the FATF stated, “Given that the VA space is rapidly evolving, the functional approach is particularly relevant in the context of NFTs and other similar digital assets. Countries should therefore consider the application of the FATF standards to NFTs on a case-by-case basis.”
Borrowing from the FATF guidance, the FSC has now revealed its stand. An FSC official confirmed in a statement, “Due to the FATF position on NFT regulation, we will not issue regulations for NFTs.”
According to the watchdog, which has become quite stringent on digital assets, NFTs are not interchangeable, and as such, they are used more as collector items and not payment methods.
Their exemptions mean that NFT owners will not be required to comply with anti-money laundering regulations. They will also not be required to pay taxes for their NFTs once the hotly-contested digital currency taxation law takes effect.
Media organization Herald Corporation notes that this lack of regulation could open up NFTs to money laundering. NFT owners can inflate the value of their NFTs and use it to launder their money.
South Korea has slightly lagged behind in the NFT sector behind its American and European peers. However, with local giants like Dunamu—the parent company of Upbit exchange—announcing their entry into the industry, it could be heading for a surge in the coming year.
Watch: CoinGeek New York panel, The New World of NFTs
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.