South Korea approves tokenized securities framework in key legislative hearing

South Korea advanced a bill that establishes a legal framework for security token offerings (STO), opening up a pathway for regulated blockchain-based issuance and trading of tokenized securities in the country.

On Thursday, the National Assembly passed amendments to the Capital Markets Act and the Electronic Securities Act during its plenary session, according to an official government release.

The legislation essentially institutionalizes the issuance and distribution of tokenized securities using distributed ledger technology. The Electronic Securities Act amendments allow qualified issuers to launch tokenized securities, while amendments to the Capital Markets Act allow such products to be traded as investment contract securities on brokerages and other intermediaries.

“We expect token securities to enable distributed ledger-based securities account management and greater utilization of smart contracts,” the Financial Services Commission said. “We also anticipate more active use of smart contracts in blockchain-based securities infrastructure.”

These amendments establish token securities as a broad term that is applicable to all kinds of securities, including debt and equity securities. The South Korean government said this amendment is expected to be especially beneficial for non-standardized investment contract securities — such as those tied to real estate, art, or livestock projects — previously limited in distribution.

Following the national legislature’s approval, the bills will be moved to the state council and then be promulgated by the President, with a high likelihood of passing. The laws are set to take effect in January 2027, after a one-year preparation period. This follows years of groundwork, after the Financial Services Commission first issued related guidelines in 2023.

The FSC will lead implementation, forming a consultation body with the Financial Supervisory Service, Korea Securities Depository, Financial Investment Association, industry participants, and experts. They aim to develop supporting infrastructure, including distributed ledger-based account management and enhanced safeguards, with a kick-off meeting scheduled for next month.

$2 trillion market

Last October, Standard Chartered predicted that the market cap for tokenized real-world assets (RWAs), excluding stablecoins, is expected to expand sharply to $2 trillion by 2028 from $35 billion at the time of the report.

According to a report from Hankyung, the Boston Consulting Group forecasted that the South Korean token securities market will grow to be worth around 367 trillion won ($249 billion) by the end of this decade. Major local players, including Mirae Asset Securities, Hana Financial Group, and others, have already started advancing related platforms and collaborations.

Meanwhile, South Korea is preparing the Digital Asset Basic Act, the nation’s second comprehensive regulatory framework. The proposal under development is expected to formalize rules for ongoing initiatives, including won-pegged stablecoins and the country’s first spot crypto ETFs. The final version of the legislation is anticipated in the first quarter of this year.