South Korea Advances Legal Framework for Tokenized Securities

TLDR

• South Korea approves amendments to integrate tokenized securities into capital markets with legal backing.
• The revised Electronic Securities Act allows tokenized securities to be issued and managed through blockchain.
• Investment contract securities can now be traded through licensed brokerages, expanding market access.
• The new regulations will help SMEs access capital by securitizing investments in diverse sectors.
• The Financial Services Commission will establish a council to oversee the implementation of tokenized securities in 2027.

South Korea’s National Assembly has approved amendments to its financial laws to integrate tokenized securities into the capital markets. The changes, which include updates to the Electronic Securities Act and the Capital Markets Act, aim to legitimize blockchain-based securities and streamline their trading.

South Korea Legalization of Tokenized Securities

The revised Electronic Securities Act now allows issuers to create tokenized securities using blockchain technology. Tokenized securities will record and manage issuance and distribution through a distributed ledger, providing a secure and efficient system.

By leveraging blockchain infrastructure, token securities can reduce fraud risks, offer transparency, and enhance market efficiency. This move formalizes blockchain as a technology for securities, aligning it with traditional financial regulations.

The law ensures that tokenized securities are legally recognized, applying the same rules that govern traditional debt and equity securities. As a result, both investors and issuers can have confidence in using blockchain for capital market activities.

Investment Contract Securities to Be Distributed through Brokerages

The amendments to the Capital Markets Act now allow investment contract securities to be traded through licensed brokerages. Previously, these securities, including joint venture investments, were available only through direct issuer solicitation. This update expands access to these securities by enabling them to be traded more efficiently through licensed intermediaries.

The new regulations will benefit small and medium-sized enterprises (SMEs) by allowing them to access capital through tokenized investment contracts. With this change, businesses across sectors such as real estate, agriculture, and art can issue tokenized securities to secure funding.

The amended laws will take effect in January 2027, following a one-year preparation period. During this time, the Financial Services Commission (FSC) will establish a “Token Securities Council” to support the full implementation of the system. The council will involve key industry participants and focus on developing the necessary infrastructure and systems for secure tokenized securities transactions.

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