South Korea is exploring ways to tax non-fungible tokens (NFTs) amid controversies surrounding crypto regulations in the country. NFTs are virtual collectibles associated with real life objects like games, artwork, and music among others with ownership locked and transferred on blockchain. The country aims to use one of its existing laws to tax incomes earned from buying or selling these virtual assets. The law that is being considered to tax NFTs in South Korea is the Act on the Specified Financial Transaction Information. It defines cryptocurrency as a “virtual asset” and focuses on a reporting system for cryptocurrency exchanges.
Doh Kyu-sang, the vice chairman of South Korea's Financial Services Commission (FSC) revealed the information to the media this week, The Korea Herald reported.
It has been a while since regulating the NFT space has remained surrounded by controversies in South Korea.
Last month, finance minister Hong Nam-ki said during a parliamentary audit session that NFTs should not be categorised as virtual assets, which is in contrast with what the FSC is now saying about the NFT space.
In fact, earlier this month the FSC had itself said that NFTs are not virtual assets, and will not be subjected to regulation.
At the time, the decision was based on the review of Financial Action Task Force's (FATF). The update was made to the 2019 guidance to a risk-based approach for virtual assets as well as virtual asset service providers (VASPs).
“NFT, or crypto-collectibles, depending on their characteristics are generally not considered to be (Virtual Assets),” the report said.
As per the South Korean law, certificate holders of virtual assets need to pay 20 percent tax on the income that exceeds $2,102 (roughly Rs. 1.5 lakh) from selling the assets, such as NFT artworks of a famous artist, the report by The Korea Herald explained.
The crypto space is under high scrutiny in South Korea.
In September this year, a new rule came into existence in the country that mandated crypto exchanges to register with the Financial Intelligence Unit and partner with banks to ensure real-name accounts.
More than 60 cryptocurrency exchanges in South Korea notified customers of a partial or full suspension of trading services.
Meanwhile, regulating the decentralised finance space has been keeping governments around the world on toes.
The crypto market crashed in India after a Parliament agenda listed by the Indian government – seeking to prohibit all private cryptocurrencies from operating in the country.