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South Korea Financial Regulator to Allow Transactions of Security Tokens by 2024

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  • South Korea will allow trading of security tokens in 2024, with specific revisions of the Electronic Securities Capital Market Acts to be submitted to the National Assembly by H1 2023.
  • The decision is part of the global investment shift and will make fractional investments easier while providing equal protection for security token and conventional security investors.
  • Some players have doubts, but major South Korean securities firms are upgrading their platforms for mobile trading, and the Philippine SEC has drafted rules including tokenized securities products as securities.

The Financial Services Commission (FSC) of South Korea has recently released a decision that will allow investors to trade security tokens in 2024, a Korean publication reported. Security tokens, as defined by the PSC, are a kind of cryptocurrency that is used to trade a portion of assets, such as real estate and artwork, in digital form. 

“We have decided to allow the new form of digitized securities to be issued here. This will enable investors to make fractional investments with more ease via security tokens. We will also protect security token investors on par with those investing in conventional securities,” said Lee Su-young of FSC’s capital market division.

According to the South Korean financial regulator, its decision was in line with the global investment paradigm shift. It will submit the specific revisions of the Electronic Securities Capital Market Acts, where the issuance and distribution of security tokens are included, to the National Assembly by the first half of 2023. 

In another report by CoinDesk, about 300 members of the National Assembly are said to discuss 17 different proposals about the crypto industry in the country, including putting stricter regulations on local exchanges that will promote fair trading and better protection for South Korean crypto investors and hodlers. The result of the discussion will be part of the comprehensive legal framework of the Digital Asset Basic Act. 

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“Brokerage houses will be able to diversify their revenue streams in their retail business, as they can raise more capital from retail investors in the security token market,” Kim Se-hee, an analyst at Eugene Investment and Securities, explained.

The decision will also allow security token investors to trade using mobile trading systems from major securities firms in South Korea, and these firms are currently busy upgrading their platforms even though the decision has not yet been approved by the National Assembly. 

However, as per the Korean publication, some players in the industry have expressed their doubts over the new regulation:

“Given that retail investors have rapidly lost interest in the once-popular non-fungible tokens (NFTs), we need to think twice before making such fractional investments using security tokens. But it is a good sign that the FSC is showing signs of easing regulations on some trendy investment areas. This will enable investors to make fractional investments with more ease via security tokens.”

Here in the Philippines, the Implementing Rules and Regulations (IRR) drafted by the Securities and Exchange Commission (SEC) for Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act (FCPA), has mentioned the inclusion of “tokenized securities products” to be tagged as securities.

The IRR has defined tokenized securities products as those that grew with the abstraction of key characteristics from cryptocurrency’s underlying distributed ledger technology to apply in the traditional financial sector.

Though the draft has caused confusion among the general public about whether cryptocurrencies will be tagged as securities under the law, the SEC has clarified:

“We note, however, that the IRR is still in the drafting stage. We can probably provide more details and clarification on the interpretation once the final IRR is released.”

This article is published on BitPinas: South Korea Financial Regulator to Allow Transactions of Security Tokens by 2024

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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