South Korea's Crypto Interest Law Excludes NFTs and CBDCS

SOUTH KOREA'S CRYPTO INTEREST LAW: NFTs AND CBDCs EXCLUDED

The Financial Services Commission (FSC) in South Korea unveils new digital asset investment regulations, slated for implementation by July 2024. Investors must now earn interest on digital assets deposited into exchanges, though notably, NFTs and central bank digital currencies (CBDCs) fall outside the scope of this legislation.

New Protocols

The FSC indicates that, under specific conditions, NFTs, usually exempt, may be deemed virtual assets eligible for interest on exchanges if deployed as payment methods in substantial quantities. Alongside these measures, the regulations introduce stringent protocols for virtual asset operators handling user deposits.

Exchanges are mandated to segregate user funds from their own assets, entrusting them to a bank. Notably, at least 80% of coins must be stored in cold wallets to bolster security measures. The regulatory guidance also extends to contingency plans for security breaches, necessitating virtual asset service providers to maintain insurance or reserve funds. Furthermore, the law imposes restrictions on the suspension of deposits or withdrawals, permitting such actions solely under extreme necessity or legal directives.

As part of a comprehensive initiative to regulate the cryptocurrency space, South Korean financial regulators actively encourage the public to report unlicensed crypto exchanges. This campaign, spearheaded by the Digital Asset Exchange Association and the Financial Intelligence Unit, underscores South Korea's commitment to fostering a secure and well-regulated digital asset marketplace.

In Conclusion

In the broader context of evolving blockchain technology, the definition of 'digital assets' has expanded beyond cryptocurrencies to include NFTs and tokenized assets such as real estate. Governments globally are adapting to these dynamic shifts in digital asset marketplaces, with the term now encompassing assets underpinned by distributed ledger technology rather than solely digital media files.