Currently, companies in various countries have revealed plans to expand their business to the NFT platform. South Korea is no exception. The share price of Wemade, a South Korean gaming company participating in the NFT, has risen nearly twice in just one month. The stock of the auction platform “Seoul Auction” has also almost doubled, which is enough to show the influence of NFT.
The government has been inconclusive about the characterization of its NFT. Taxation of trading NFTs is still a blind spot because NFTs are not considered virtual assets.
The South Korean government is considering whether to create a separate tax category for NFT
Finance Minister Hong Nam Ki said last month:
“The government is considering whether NFTs can be regarded as virtual assets. Because there is always a need to include them in the category of virtual assets for taxation.”
As the government announced a plan. From January next year, taxes will be levied on the trading income of virtual assets such as cryptocurrencies. Now it has less than two months to develop a detailed plan.
Whether it is for cryptocurrency assets or NFTs, it is an industry that is too new. If the government’s policies cannot keep up in time, it can easily be used for tax evasion or money laundering.
Today, the South Korean Financial Services Commission (FSC) reiterated in today’s public statement. Non-fungible tokens (NFT) are not virtual assets and will not be regulated.
On October 28, the Financial Action Task Force (FATF) guidance report stated that “NFT or encrypted collectibles, based on their characteristics, are not generally regarded as [virtual assets].”
After reviewing the updated guidelines, the Korean government reconfirmed its decision to keep the NFT unregulated.
The FATF, South Korea’s financial regulator, considers NFTs “unique, not fungible.” This is of course an irreplaceable definition. NFT is used as a collection rather than as a means of payment.
But not all South Korean institutions agree with this. South Korean newspaper Herald Corp reported that South Korean experts believe that NFT prices can be manipulated and used for money laundering. And because they are not considered virtual assets, the issuer does not need to comply with anti-money laundering obligations.
Even from January 2022, South Koreans will have to pay taxes on cryptocurrencies, and they will not need to pay taxes on NFTs.
Hybe and Dunamu jointly develop NFT
The most beneficial of this policy is undoubtedly Dunamu, the parent company of Upbit, South Korea’s largest virtual currency trading platform.
Recently, Hybe, the organization behind the K-pop band BTS, and Dunamu, the operator of the cryptocurrency exchange Upbit, have agreed to form a joint venture to develop NFTs.
The two companies will exchange shares through a third-party allotment of capital increase. Hybe will acquire a 2.5% stake in Dunamu worth 500 billion won (423 million US dollars). Dunamu will purchase 700 billion won of newly issued Hybe shares, which account for 5.6% of the music organization.
On the second day of the announcement, Hybe’s share price rose 4.9%.
From November 4th to November 6, Busan City, South Korea and the Busan Blockchain Industry Association are hosting the largest NFT (Non-Fungible Token) exhibition event-“NFT BUSAN 2021”.
Obviously, South Korea’s NFT development will gain more development freedom because of this policy.
In the context of the exponential growth of the global NFT trading market, governments and legislatures must keep up with rapid changes. Otherwise, the laws surrounding emerging assets will continue to trouble governments.