[Consultation] Review of the securities nature of platform coins (virtual currency) and NFTs of metaverse services.

Law firm Veat conducted due diligence on coins (virtual currencies) and NFTs used within the platform of metaverse services, and the securities examination thereof.

A startup-focused investment corporation A Co. requested a legal review regarding business models that involve creating real estate as NFTs within the platform of metaverse services and issuing associated virtual currencies.

In response, Law firm Veat analyzed the coins (virtual currencies) and NFTs, as well as business models within the metaverse service platform requested by A Co., and conducted a deep review regarding securities compliance in accordance with the “Act on Reporting and Use of Financial Information” (hereinafter referred to as the “Financial Information Act”) and the “Act on Capital Markets and Financial Investment” (hereinafter referred to as the “Capital Markets Act”).

NFTs differ from existing virtual assets in that they represent ownership of physical assets, which raises the possibility of being interpreted as securities. The Financial Services Commission has been operating a Securities Review Committee since February 2022 to determine the investment nature and whether they are securities of virtual assets, including NFTs. If the business model and virtual assets linked to NFTs are judged as securities according to the Capital Markets Act, they will be incorporated into the supervision target of the Financial Supervisory Service and risk being subject to penalties under the Capital Markets Act.

Therefore, NFT issuers, platform operators, and NFT exchanges should proactively examine the possibility that the NFT linked to a specific business model could be interpreted as an investment contract or other types of securities in the business planning stage and carefully formulate business plans. Startups launching NFT businesses, along with other coin and token businesses, also need to carefully review legal risks.

Law firm Veat provides in-depth legal advice, including securities examination and legal compliance of issuing and distributing coins (virtual currencies) and NFTs based on a broad understanding of the blockchain, NFT, and metaverse industries. Specifically, the firm’s representatives, Partner Lawyers Seongho Choi, Dongyoung Song, and Ilwon Ahn, have been appointed as members of the IT Blockchain Committee of the Korean Bar Association, further enhancing their expertise.

Thank you. Law firm Veat Dream