South Korea Moves Forward with Bill to Legalize Tokenized Securities

South Korea is making significant progress in formalizing blockchain-based capital markets. The country's lawmakers have advanced legislation designed to establish a legal framework for the issuance and trading of tokenized securities.

Key Takeaways:

South Korea has approved a legal structure for the issuance and trading of tokenized securities.
Transactions involving blockchain-based securities will be regulated and executed through licensed intermediaries.
These new regulations are set to be implemented in 2027.

This legislative advancement allows for regulated security token offerings (STOs) and solidifies the role of distributed ledger technology within South Korea's existing financial infrastructure.

During a recent plenary session, the National Assembly passed amendments to both the Capital Markets Act and the Electronic Securities Act, according to an official government announcement.

South Korea Advances Bill to Legalize Issuance, Trading of Tokenized Securities

Legal Framework for Tokenized Securities in South Korea

The new changes recognize tokenized securities as valid financial instruments and outline the processes for how they can be issued, distributed, and traded under Korean law.

The revised Electronic Securities Act permits eligible issuers to create tokenized securities utilizing blockchain technology. Concurrently, the amendments to the Capital Markets Act allow these products to be traded as investment contract securities via brokerages and other licensed intermediaries.

Regulators aim to merge the advantages of distributed ledger technology with existing protections for investors.

The Financial Services Commission has stated that these reforms are expected to enhance the management of securities accounts and increase the use of smart contracts within market infrastructure.

Officials have characterized tokenized securities as a broad category that encompasses both debt and equity products, moving beyond a niche asset class.

Government representatives emphasized the potential advantages for non-standard investment contracts, such as those linked to real estate, art, or agricultural initiatives, which have typically faced distribution challenges. By bringing these products under a regulated STO framework, the aim is to broaden access for investors while ensuring appropriate oversight.

Following legislative endorsement, the bills will advance to the state council before being officially promulgated by the president. This transition is anticipated to be finalized without major alterations.

The new laws are scheduled to come into effect in January 2027, following a one-year preparation phase.

South Korea's foray into tokenized securities builds on earlier groundwork established by the Financial Services Commission, which first released guidelines related to STOs in 2023.

The implementation will be spearheaded by the Financial Services Commission, along with the Financial Supervisory Service, the Korea Securities Depository, and various industry stakeholders.

A consultative body is expected to convene as soon as next month to develop essential infrastructure, including ledger-based account management systems and added security measures.

Global Tokenized Securities Market Growth Potential

Market forecasts suggest a substantial opportunity in this arena. Standard Chartered has estimated that tokenized real-world assets could achieve a market capitalization of $2 trillion by 2028.

In a separate analysis, Boston Consulting Group predicted that South Korea's tokenized securities market alone could approach 367 trillion won (approximately $249 billion) by the decade's end.

Local financial entities, including Mirae Asset Securities and Hana Financial Group, have already initiated the development of platforms in anticipation of the new regulations.

Additionally, last month, South Korea announced plans for one of its most comprehensive crackdowns on cryptocurrency-related financial crime by expanding its travel rule requirements. This new policy now covers transactions below 1 million won ($680), previously allowing users to bypass identity checks by splitting transfers into smaller amounts.