Korea's FSC confirms that NFTs will not be regulated

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

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

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

“Due to the FATF position on $NFT regulation, we will not issue regulations for NFTs.”

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 are used as collector items instead of as a means of payment to finalize their decision.

Not everyone approves. South Korean newspaper Herald Corp reported that experts in Korea believe that $NFT prices can be manipulated and used for money laundering and since they are not considered to be 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 even though they will need to pay taxes on cryptocurrencies starting in January, 2022.

Related: South Korean pension fund to invest in Bitcoin ETF: Report

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

Dunamu and its high profile new partner Hybe are set to enter the $NFT arena together with collectibles based on the wildly popular BTS K-pop group. Hybe is the entertainment group behind the group and recently announced that it would buy a 2.5% stake in Dunamu, worth a reported $423.1 million. As part of the deal Dunamu will acquire a 5.6% stake in Hybe worth $592.4 million.