Latest news on NFT market in Korea

While the government begins reviewing NFT taxation plan, the Korean NFT market has been very active lately with the development of new applications by a number of stakeholders.

Among them, a blockchain technology provider G. has recently mentioned that its ecosystem plans to enable a variety of NFT-based services such as (1) Trader Card (2) NFT asset management (3) NFT exchange. In this regard, the company has concluded partnerships with NFT-related companies to develop the services abovementioned.

(1) The company has developed a partnership with a company providing a platform that helps traders capitalize their investment strategies and reputation using its blockchain-based NFTs. In particular, It allows traders to issue a type of membership about their trading history in the form of a ‘Trader Card’ (NFT) and put it up for auction to generate profits. It is similar to selling and trading golf course memberships or hotel gym memberships. This service is unique as it enables trader’s investment strategy or membership right to be applied to NFT.

(2) The blockchain provider is also collaborating with a diversified integrated NFT asset management platform provider, which manages about $214 million worth of NFTs. The platform helps to identify at a glance NFTs scattered in different wallets and check transaction history. In addition, it provides a NFT valuation model developed in-house and a NFT valuation function using big data. Through the partnership with the blockchain provider, the NFT-based asset manager, which aims to become a financial institution in the NFT market, will support the blockchain-based NFTs in its services.

(3) In addition, the blockchain provider has recently completed technical integration with the world’s largest NFT exchange in terms of valuation. By doing so, it made it possible to distribute and trade its blockchain-based NFTs, enabling users to sell their NFTs at the NFT exchange.

Another interesting fact worth mentioning is that public institutions are getting interested in NFTs. This is the case of the Central Bank of Korea that is working on a Central Bank Digital Currency (CBDC) simulation in collaboration with tech companies. In the CBDC service proposal, it is mentioned that in the second stage of the simulation, users will be required to purchase digital art and copyrights through CBDC. By including NFT-liked assets in the simulation, the public institution is paving the way towards a broader adoption of NFTs at a national level.

That said, it remains to be seen how the NFT will be considered from a legal perspective since it’s still unclear whether NFTs are considered as virtual assets or not. On August 12th, the Ministry of Economy and Finance (MoEF) confirmed that it is reviewing the NFT taxation plan with the National Tax Service and the Financial Services Commission (FSC). The issue is whether NFTs should be viewed as existing virtual assets such as Bitcoin and Ethereum. In other words, the discussions will be about whether or not to tax NFTs. To determine this, the MoEF, the National Tax Service, and the FSC plan to finalize the definition of NFT before the enforcement of the NFT law next year.

Source: https://www.hankyung.com/it/article/202108092143g

Our View: While NFT market is flourishing in Korea, the government has not decided yet how to consider this technology from a legal standpoint. Provided that cryptocurrency-related businesses are strictly regulated and have few leeway, applying a similar regulation to NFTs could have a negative impact that could slow down the growth of this market after the enforcement of a law considering NFTs as digital assets. That said, the implementation of this technology in public pilot projects such as the CBDC simulation open the door for a recognition from the public sector of the utility of NFTs. The latter can also be reflected by its adoption from national museum to raise funds for the national cultural heritage preservation.