About us
(Seoul=Yonhap Infomax) Gyeong Eun Park = The legislative process to introduce token securities in South Korea is finally gaining momentum. With the National Assembly’s Political Affairs Committee beginning its review of related amendments, the long-stalled institutional debate has now entered the formal legislative phase, raising expectations across the industry.
On the 24th, the first subcommittee of the Political Affairs Committee passed bills related to the introduction of token securities.
These bills are scheduled for discussion at the full session of the Political Affairs Committee on the 27th, after which they will be reviewed by the Legislation and Judiciary Committee. If there are no objections between the major parties, the bills could be presented to the National Assembly’s plenary session as early as next month. Given the bipartisan consensus, expectations are high for legalization within the year.
The subcommittee reviewed amendments to the Capital Markets Act and the Electronic Securities Act. Min Byung-deok and Kang Jun-hyun of the Democratic Party, as well as Kim Jae-seop of the People Power Party, submitted both amendments, while Cho Seung-rae of the Democratic Party proposed the Capital Markets Act amendment.
Both the proposed Capital Markets Act and Electronic Securities Act would allow qualified issuers to issue token securities using blockchain (distributed ledger) technology. The bills also provide for the establishment of secondary markets to enable trading of token securities.
This acceleration in legislation comes more than two years after the Financial Services Commission (FSC) announced plans in February 2023 to overhaul the regulatory framework for the issuance and distribution of token securities.
At that time, the FSC’s plan included recognizing token securities as a form of electronic securities, establishing new account management institutions for issuers, and allowing qualified issuers to issue token securities directly without intermediaries.
In July of the same year, amendments to the Electronic Securities Act and Capital Markets Act reflecting these details were submitted to the National Assembly, but were discarded with the end of the legislative session the following year.
The FSC has also designated the institutionalization of token securities and fractional investment platforms as a key policy task for the year, aiming to support fundraising and asset securitization for SMEs and venture companies. The regulator has since outlined institutionalization plans for fractional investment, small licenses, and operational standards, mapping out the issuance and distribution framework for digital assets.
Although review of the amendments proposed last year was expected in July, prolonged deliberations on other bills delayed consideration of token securities legislation. With the subcommittee review now complete, the first step toward institutionalization has been taken after a lengthy process.
Industry players are also expressing optimism. Financial institutions and platform companies are already preparing business models tailored to the upcoming regulatory framework.
Hana Securities Co. participated in the token securities testbed platform project, while Mirae Asset Securities Co. formed the Next Finance Initiative (NFI) in partnership with SK Telecom Co. and others, building a system that covers issuance, investment, payment, and settlement. NH Investment & Securities Co. established the STO Vision Group with banks, and KB Securities Co. formed the ST Owners Council.
Platform companies are also expanding their businesses. Real estate-based firms such as Kasa, Funble, Lucent Block, and Bvric are competing in the market, while art fractional investment company Tessa has expanded into the renewable energy sector. BuySellStandard has developed capabilities to handle token securities backed by a variety of underlying assets.
The selection process for a fractional investment over-the-counter (OTC) exchange—seen as a prelude to competition among token securities platforms—is also underway. Three consortia, led by Korea Exchange, Nextrade, and Lucent Block, have submitted bids, with regulatory review ongoing.
Shin Beom-jun, CEO of BuySellStandard and director at the Korea Fintech Industry Association, commented, “With world-class IT infrastructure and high retail investor participation, South Korea is ideally positioned to become Asia’s token securities hub once legislation is complete. Token securities will drive innovation across capital markets and contribute to the dynamism of the Korean economy and the startup ecosystem.”
gepark@yna.co.kr
(End)
Copyright © Yonhap Infomax Unauthorized reproduction and redistribution prohibited.