What To Know:
- Amendments to capital markets laws allow compliant issuers to directly issue security tokens using blockchain infrastructure.
- The law introduces issuer custody accounts and account management institutions to strengthen investor protection and compliance.
- Core provisions take effect immediately, with solicitation rules and OTC trading phased in over the next year.
South Korea is formalizing tokenized finance, with the National Assembly passing amendments that allow compliant issuers to directly issue security tokens using blockchain technology. The move establishes a clear legal framework for Security Token Offerings, or STOs, and brings years of regulatory discussion into statute.
South Korea Allows Tokenized Finance
The amendments revise both the Capital Markets Act and the Act on the Electronic Registration of Stocks and Bonds. Together, they institutionalize tokenized securities within South Korea’s existing financial system and provide legal recognition for the issuance and circulation of digital securities. Lawmakers approved the package during a plenary session on January 15, as part of an agreement between ruling and opposition parties to advance a set of non-controversial livelihood bills.
At the heart of the legislation is the introduction of an issuer custody account system. As per reports, under this structure, issuers that meet defined regulatory conditions can directly issue and manage security tokens through blockchain-based electronic registration. Until now, tokenized securities operated largely within pilot programs and regulatory guidance. The new framework places them firmly under statutory oversight.
The amendments also introduce the concept of distributed ledgers into capital markets law. This allows blockchain networks to be used as official infrastructure for recording ownership and transactions of securities. Lawmakers framed the change as a way to improve both security and usability, and also maintain regulatory controls comparable to those applied to traditional financial instruments.
In parallel, the revised law creates a new category of issuance account management institutions. These entities will control the management of tokenized securities accounts, and ensure compliance with investor protection rules and operational standards. Investment contract securities and other atypical securities are now explicitly brought under the scope of the Capital Markets Act, closing a regulatory gap that had previously left some digital instruments in legal uncertainty.
The amendments also open the door for broader circulation of tokenized securities. Certain instruments will be permitted to trade in the over-the-counter market through newly established brokerage services. Thus, issuers and investors gain a regulated secondary market option, while authorities retain visibility into transactions.
The rollout, however, will be gradual. Provisions tied to the revised Capital Markets Act take effect immediately upon publication. Rules around investment solicitation will follow six months later. Measures related to over-the-counter trading will come into force one year after publication, giving market participants time to prepare their systems and compliance processes.
The STO legislation passed alongside several unrelated but politically aligned bills. Among them was an amendment to the Basic Act on Disaster and Safety Management, which establishes a formal legal basis for the Central Joint Disaster Victim Support Center. The center had previously responded to major incidents on a temporary basis, for e.g., during the December 29 passenger plane disaster and large-scale wildfires in the Yeongnam region.
Policy makers also approved changes which allow annual surveys on disaster recovery progress for improving long-term support for victims. Another amendment expanded information sharing across financial, telecommunications, and investigative agencies to combat voice phishing and financial fraud.
Despite the crowded legislative agenda, the tokenized securities framework stood out for its long-term implications. Financial regulators first released STO-related guidelines nearly three years ago. Since then, banks, brokerages, and technology firms have waited for legal affirmations before committing capital to blockchain-centric securities infrastructure.
South Korea’s decision places it among jurisdictions seeking to balance innovation with tight regulatory supervision. At the same plenary session, lawmakers also reported on competing requests for state investigations into Coupang. The Democratic Party submitted a request citing alleged illegal corporate practices (like personal data breaches and labor concerns). The People Power Party, on the other hand, called for an investigation focused on preventing future hacking incidents and large-scale data breaches.
Also Read: South Korea Allows Corporates to Invest Up to 5% in Crypto Market
