Recent Developments
With its resolution numbered i-SPK.35.B.1 (dated 19 September 2024 and numbered 1484) (the "Resolution"), the Capital Markets Board (the "CMB") clarified the legal status of non-fungible tokens ("NFTs") and crypto assets used in virtual games. The CMB also stipulated that liquidity providers for crypto assets will not be considered "platforms," and certain transactions carried out as a regular occupation, or commercial or professional activity on digital marketplaces that allow peer-to-peer ("P2P") trading may fall within the scope of unauthorized crypto asset service provision. You can access the CMB bulletin where the Resolution was published here.
What's new about the NFTs?
With the Resolution, the CMB stipulated that NFTs, which the CMB defines as "crypto assets that are used to record the representation and ownership of digital assets, which are of a non-replicable and unique nature", and crypto assets that are only used to create or provide various elements in virtual games will not fall within the scope of the listing principles set out in the Capital Markets Law No. 6362 (the "CML"), and that the provisions of the CML will not apply to those who provide trading, initial sale or distribution, clearing, and transfer and custody services in respect of these crypto assets.
However, platforms will be required to notify the CMB if they provide any services in respect of these assets. In addition, platforms will be obliged to trade these assets in a separate market from the crypto assets listed in accordance with the CML, and to inform their clients that these assets are not subject to the supervision and audit of the CMB in the environment where orders are received, using the standard text to be determined by the CMB.
Status of liquidity providers
Liquidity providers, whose main activity is to provide prices to platforms to generate liquidity and to execute transactions based on the prices provided, and who do not provide any other service to investors that may fall within the scope of the definition of platform, will not be considered platforms. Accordingly, liquidity providers will be able to continue their operations without meeting the establishment conditions required for the platforms and the operating requirements to be determined by the CMB in the future.
P2P transactions to be carried out as a commercial or professional activity
Trading on its own behalf but for the account of another person as a regular occupation, or commercial or professional activity on P2P digital marketplaces, which enables the purchase, sale and exchange of crypto assets directly between users, may fall within the scope of unauthorized crypto asset service provision. The Resolution sets 8 November 2024 as the deadline to cease such activities.
Conclusion
The CMB persistently regulates crypto assets and their service providers with unwavering diligence, while the regulatory framework for these assets continues to evolve in complexity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.