South Korea Opens Door to Security Token, Enabling Fractional Investment

Amendments to the Related Act Pass National Assembly
Law takes effect in January next year
Security Token Council to launch in February

By Kim Yeon-seo, Edaily Marketin

South Korea has formally cleared the way for security tokens, giving blockchain-based assets such as real estate and artwork legal status and allowing investors to buy fractional stakes in physical and alternative assets.

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The Financial Services Commission said Wednesday that the National Assembly approved amendments to the Electronic Securities Act and the Capital Markets Act, establishing a regulatory framework for issuing and trading securities on blockchain-based distributed ledgers.

security tokens record issuance and ownership data on blockchain infrastructure, allowing assets like property, music rights and fine art to be divided into digital tokens and sold to multiple investors.

The legislation authorizes the use of distributed ledger technology as an official securities registry and permits brokerages to distribute investment contract securities, a structure in which investors pool capital into business projects and share returns.

Until now, those products could not be traded through licensed securities firms. Under the revised rules, projects ranging from art exhibitions and asset management to livestock and real estate ventures can now be securitized and offered to the public, opening new funding channels for small and mid-sized businesses.

Demand for fractional investment has been growing as blockchain technology matures, but security tokens had remained in regulatory limbo due to the lack of a formal legal framework governing issuance and secondary trading.

Industry players say most technical and operational systems are already in place, allowing issuance and trading to begin once the law takes effect.

Issuers must notify and register with the country’s electronic securities depository before launching tokenized products. While tokenization can be applied to both debt and equity, regulators expect the structure to be used most actively for newer asset classes such as investment contract securities.

security tokens will be regulated in the same way as traditional securities. Unlicensed brokerage activity will be illegal, and public offerings will require registration statements and full disclosure.

The law will take effect in January next year, one year after promulgation. The Financial Services Commission plans to launch a Token Securities Council to coordinate market infrastructure, issuance standards and trading systems. The group will include regulators, the Korea Securities Depository, financial institutions, fintech firms and academic experts, and is scheduled to hold its first meeting in February.

Shin Beom-jun, head of the Korea Fintech Industry Association’s Token Securities Council and CEO of Bysell Standard, said, “This is highly meaningful in that a long-standing challenge for the entire token securities industry has finally been resolved,” adding, “The passage of the bill signals that a market prepared jointly by the public and private sectors over many years is now entering the execution phase.”

김연서 (yonso@edaily.co.kr)