In recent developments, South Korea is taking significant strides to solidify its position in the global cryptocurrency market. Legislators are pushing forward a comprehensive framework aimed at regulating the issuance and trading of security token offerings (STOs) utilizing distributed ledger technology (DLT).

New Legislative Changes for Tokenized Securities

On a pivotal day in the National Assembly, lawmakers approved substantial amendments to both the Capital Markets Act and the Electronic Securities Act. These changes aim to establish a robust legal basis for the creation and dissemination of tokenized securities.

Official announcements indicate that the revised regulations will categorize tokenized securities broadly, encompassing both equity and debt instruments, thereby acknowledging their legitimacy as financial assets.

Thanks to the amendments to the Electronic Securities Act, qualified issuers are now authorized to issue tokenized securities through DLT. Concurrently, changes in the Capital Markets Act will facilitate the trading of these financial products as investment contract securities via licensed brokers.

Previously, the Capital Markets Act barred securities firms from distributing non-standard investment contract securities, which posed limitations on market accessibility.

According to government sources, these legislative reforms are set to improve investment accessibility and enhance the flow of information related to these securities.

Following legislative approval, the proposed bill is slated for consideration by the State Council and, upon government endorsement, will likely be enacted in early January 2027.

The Financial Services Commission (FSC) will spearhead the implementation, collaborating with other agencies to establish a “Token Securities Council” aimed at ensuring effective preparatory actions including technological support and safeguards.

This collaborative body will include representatives from the FSC, Financial Supervisory Service, and industry experts to foster a comprehensive approach to token securities.

A Continued Focus on Crypto Regulations

This legislative advancement is indicative of South Korea’s ongoing commitment to creating a clear regulatory environment for the cryptocurrency sphere. Recently, the government outlined its 2026 Economic Growth Strategy, incorporating a proposal to introduce Bitcoin (BTC) Exchange-Traded Funds (ETFs) this year.

Since 2017, crypto-based ETFs have faced restrictions in South Korea. In 2024, the regulatory body reaffirmed its stance despite moves from other countries after witnessing the successful adoption of such products.

The FSC is actively working on the next phase of its digital asset legislation, targeting the establishment of regulatory guidelines for stablecoins within the upcoming quarter. Reports indicate that a comprehensive framework is crucial for investor protection and risk management in this burgeoning sector.

Financial regulators have experienced ongoing discussions over stablecoin regulations, particularly regarding the role of banks in issuing won-pegged tokens. These discussions underline the need for a unified approach moving forward.

Despite these hurdles, the main policies for the crypto landscape are being finalized. Proposed regulations will include investor protection provisions along with mechanisms to shield against bankruptcy risks for stablecoin issuers.

Moreover, South Korea is poised to relax its longstanding restrictions on institutional crypto trading, expected to commence later this year. Regulatory proposals indicate that corporations might be able to invest up to 5% of their equity capital in cryptocurrencies, particularly the top 20 by market cap.

This policy aims to promote stability and responsible investment while setting a framework that encourages participation in the crypto market. Regulatory drafts may be unveiled as early as January or February.