As South Korea intensifies its push for crypto regulation, lawmakers have advanced a bill to establish a legal framework for issuing and trading security token offerings (STOs) using distributed ledger technology (DLT).
Lawmakers Amend Framework For Tokenized SecuritiesOn Thursday, South Korea’s National Assembly passed key amendments to the Capital Markets Act and the Electronic Securities Act, creating a legal framework for the issuance and distribution of tokenized securities.
The amendments to the Electronic Securities Act will allow qualified issuers to launch tokenized securities using distributed ledger technology. Meanwhile, the Capital Markets Act changes will enable the products to be traded as investment contract securities on brokerages and other licensed intermediaries.
Notably, the existing Capital Markets Act prohibited the distribution through securities firms, deeming investment contract securities “unsuitable for distribution due to their non-standard characteristics.”
After legislative approval, the bill will be submitted to the State Council, followed by official presidential promulgation. Therefore, the legislation is expected to be enacted one year after being signed into law, tentatively in January 2027.
Moreover, the Financial Services Commission (FSC) is set to lead the implementation, forming a joint “Token Securities Council” with relevant agencies to ensure seamless preparatory work, including the development of supporting infrastructure and enhanced safeguards.
The consultation body will comprise the FSC, the Financial Supervisory Service, the Korea Securities Depository, the Financial Investment Association, industry participants, and experts.
South Korea’s Crypto Regulatory Push ContinuesCrypto-based ETFs have been banned in South Korea since 2017. In 2024, the country’s regulator reaffirmed its stance after the US Securities and Exchange Commission (SEC) approved the investment products. However, it has now cited the success of the US and Hong Kong’s crypto funds as a key factor for their shift.
The financial authorities have been clashing for months over rules related to the issuance and distribution of stablecoins, disagreeing on the extent of banks’ role in the issuance of won-pegged tokens.
Nonetheless, the main policies of the crypto framework have been decided, set to include investor protection measures, such as no-fault liability for crypto asset operators and isolation of bankruptcy risks for stablecoin issuers.
Under the latest proposal, eligible firms would be able to allocate up to 5% of equity capital per year to digital assets, limited to the top 20 cryptocurrencies by market capitalization. The final draft version could be released as early as January or February.
