Non-fungible tokens (NFTs) used in games and payment platforms meet the definition of crypto-assets, a Korean think tank said in a report, raising expectations of potential protection of NFT investors in a regulatory framework.
An NFT is a digital asset that represents real-world objects with unique properties like art, music, in-game items and videos and can be under only one ownership at a time that is secured by the blockchain technology, a distributed public ledger that records transactions. As NFTs have lately emerged as popular alternative investment, it has been discussed whether some NFTs should be classified as cryptos so that they can be subject to regulation by financial authorities.
According to sources on Tuesday, state-run Korea Institute of Finance recently submitted a study report commissioned by the Financial Services Commission (FSC). In the report titled ‘NFT Characteristics and Regulatory Measures’ exclusively obtained by Maeil Business Newspaper, the think tank classified NFTs into five categories according to their issuance type: ‘In-Game item NFT`, `NFT art`, `Security-type NFT`, `NFT as a payment means` and `Physical-type NFT`.
Of these, NFTs for in-game collectibles and payment means can satisfy the definition of cryptocurrencies under the Act on Reporting and Using Specific Financial Transaction Information, the report said. But NFTs for digital artworks or physical objects may not fall within the definition under the law.
Securities-type NFTs containing the contractual right to profit and loss sharing in business results should be classified as financial assets if they are judged to have the properties of securities. If those securities-type NFTs are classified as financial assets, they are subject to financial supervision under the Financial Investment Services and Capital Markets Act.
Whether or not NFTs should be regulated must be judged from a functional point of view, rather than focusing on what has been issued or what technology has been used, said Korea Institute of Finance’s senior researcher Lee Yoon-seok who oversaw the study.
By Kim Yoo-sin, Myung Ji-ye and Minu Kim
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]
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