Korea’s FSC has confirmed that NFTs will not be regulated.  The Financial Services Commission (FSC), formerly Financial Supervisory Commission, is South Korean government’s top financial regulator.

NFTs, or nonfungible tokens, are unique assets that can’t be replaced with something else, and are verified and stored using blockchain technology. They can include everything from music to a website domain, but the current craze is really around digital artwork.

The Financial Services Commission has decided to keep NFT unregulated.  And, they do not consider it to be virtual assets.  This decision has come after the review of the Financial Action Task Force’s (FATF) updated guidelines.

The Financial Action Task Force, also known by its French name, Groupe d’action financière, is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. In 2001, its mandate was expanded to include terrorism financing.

Dated, October 28, 2021, The FATF guidance states that “NFT, or crypto-collectibles, depending on their characteristics are generally not considered to be [Virtual Assets].”

Korea’s financial regulator focused on the fact that NFTs are “unique, rather than interchangeable.” Thus, they are worth being used as a collector item instead of a means of payment.

Further, experts opine that the price of NFTs can be manipulated and therefore can pave way for money laundering. As they are not considered to be virtual assets, issuers might not be obliged to be compliant with AML obligations. Thus, Koreans might not be asked to pay taxes on NFTs; however, they need to be paying taxes on cryptocurrencies beginning January 2022.

The reality is that the idea of NFTs as a good and safe investment at this time is pretty unrealistic. NFTs are a useful when it comes to leveraging the utility of blockchains, the idea that they’re a great as a safe investment seems to be flawed.

Proposed changes to the FATF Standards aim to strengthen measures that will prevent criminals from hiding illicit activity and proceeds, including by requiring countries to establish a beneficial ownership registry or use an alternative system that also enables efficient access to beneficial ownership information.

Technology has the potential to make anti-money laundering and counter terrorist financing efforts faster, cheaper and more efficient. FATF’s work is exploring the challenges and opportunities that digital transformation offers.

Those who want to know more should check, “Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers.”