May 29, 2024
South Korea Exempts NFTs and CBDCs From Crypto Interest Rules
Policy & Regulation

South Korea Exempts NFTs and CBDCs From Crypto Interest Rules

Users depositing digital assets on South Korean exchanges will be entitled to receive interest on their deposits, according to a notice from the Financial Services Commission (FSC). The FSC stated that by July 2024, investors in digital assets must earn interest on their funds when deposited on an exchange. The guidance specified that nonfungible tokens (NFTs) and central bank digital currencies (CBDCs) are exempt from this requirement.

Local media reported on Dec. 10 that the FSC is set to release legislative guidance, with exceptions for NFTs. Even if categorized as NFTs, tokens that function as a payment method and are issued in large quantities may be included in the virtual asset classification, making them eligible for interest when deposited.

The South Korean regulator also outlined procedures for handling user deposits by virtual asset operators. Exchanges must separate user deposits and their assets, entrusting them to a bank. Additionally, 80% of coins must be stored in a cold wallet.

The guidance extends to requirements for preparing against hacks or other computer incidents. Virtual asset service providers are mandated to acquire insurance or build reserves. The law prohibits blocking deposits or withdrawals unless deemed necessary and authorized by courts and financial regulators.

South Korea has been strengthening regulations in the crypto space. In December, financial regulators urged users to report unlicensed crypto exchanges operating within the region, with the Digital Asset Exchange Association and the Financial Intelligence Unit of South Korea leading the initiative.

Image by www.slon.pics on Freepik

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