South Korea Sharpens Crypto Strategy With Comprehensive Tokenized Securities Regime
South Korea is moving decisively to bring tokenized securities into the heart of its financial system, advancing a detailed legal framework just as it tightens oversight of the broader digital asset market.
Lawmakers in the National Assembly have approved key amendments to both the Capital Markets Act and the Electronic Securities Act, laying the groundwork for the issuance, trading, and custody of tokenized securities, often referred to as security token offerings (STOs), on distributed ledger technology (DLT).
Tokenized Securities Officially Recognized as Financial Instruments
According to the government’s announcement, the revised rules provide, for the first time, a clear legal definition of tokenized securities. These instruments will cover a wide spectrum of products, including both equity-like and debt-like claims, and will be formally recognized as legitimate financial assets within the country’s capital markets regime.
By framing tokenized securities as a broad category that encompasses traditional investment contracts in digital form, the amendments aim to remove ambiguity that has previously discouraged institutional players and conservative investors from engaging with STOs.
Electronic Securities Act: Green Light for On-Chain Issuance
Changes to the Electronic Securities Act open the door for qualified issuers to create and register digital securities using DLT. This means companies will be able to issue shares, bonds, or other financial claims as tokens recorded on a distributed ledger instead of—or in addition to—traditional paper or centralized electronic ledgers.
Issuers that meet regulatory requirements will be allowed to:
– Launch STOs directly on approved DLT platforms
– Maintain ownership records and transaction histories on-chain
– Integrate tokenized instruments into existing post-trade and settlement systems, subject to oversight
This shift is expected to streamline issuance, reduce back-office costs, and enable new, more flexible product structures that were previously difficult or inefficient to manage through legacy systems.
Capital Markets Act: From “Unsuitable” to Tradeable Investments
Perhaps the most significant policy reversal appears in the amended Capital Markets Act. Previously, investment contract securities were effectively barred from distribution by securities firms, as the law deemed them “unsuitable for distribution due to their non-standard characteristics.”
The new framework overturns that limitation. Under the revised act:
– Tokenized securities can be treated as investment contract securities
– Licensed brokers and other regulated intermediaries will be allowed to list, distribute, and trade these products
– STOs will be integrated into the same ecosystem that supports conventional stocks, bonds, and funds
The government expects these changes to meaningfully “enhance accessibility to investments” while improving the availability and quality of information for investors evaluating tokenized products.
Timeline: Full Implementation Targeted for Early 2027
Now that the National Assembly has passed the amendments, the legislation will proceed to the State Council for approval, followed by presidential promulgation. Once signed, the law is designed to come into effect one year later, with officials tentatively pointing to January 2027 as the target date for full implementation.
This phased approach is meant to give regulators, financial institutions, and technology providers enough time to build the necessary infrastructure and adapt internal processes before the market for tokenized securities is fully opened.
FSC to Lead Through a New “Token Securities Council”
The Financial Services Commission (FSC) will play the central role in putting the new system into practice. To coordinate the rollout and resolve technical and legal hurdles, the FSC plans to form a joint “Token Securities Council.”
This consultative body will bring together:
– The Financial Services Commission (FSC)
– The Financial Supervisory Service
– The Korea Securities Depository
– The Financial Investment Association
– Industry participants
– External experts and academics
The council’s mandate will include designing market infrastructure, establishing standards for DLT-based issuance and custody, aligning investor protection rules with existing securities law, and setting safeguards against fraud, cyber risks, and operational failures.
Part of a Larger Overhaul of Digital Asset Regulation
The tokenized securities initiative is only one pillar of South Korea’s broader effort to modernize its financial regulation in response to rapid growth in the digital asset sector.
The government recently unveiled its economic strategy for 2026, which includes a plan to open the domestic market to Bitcoin exchange-traded funds (ETFs) later this year. This marks a significant policy shift: crypto-based ETFs have been banned in South Korea since 2017, and regulators reiterated that position even after similar products were cleared by US authorities in 2024.
Authorities now point to the strong market performance and adoption of crypto ETFs in jurisdictions such as the United States and Hong Kong as a key reason for reconsidering the ban. The move on ETFs dovetails with the tokenized securities framework, signaling that policymakers want digital-asset-based products to coexist with, and be supervised like, traditional market instruments.
Next Phase: Stablecoin and Digital Asset Legislation
In parallel, the FSC is accelerating the second stage of its digital asset legislative program, which focuses on stablecoins and comprehensive protection for virtual asset users. This follow-up package has been delayed to early 2026 due to ongoing disputes between the FSC and the Bank of Korea (BOK).
The core of the disagreement lies in:
– How stablecoins should be issued and redeemed
– How much responsibility and control should rest with commercial banks
– The degree of central bank oversight for tokens pegged to the Korean won
Despite the delay, most of the key principles for the framework have already been agreed. Planned measures include:
– Stronger investor protection mandates for crypto service providers
– “No-fault” liability regimes for certain operator failures, meaning users can be compensated without proving negligence in some circumstances
– Structural safeguards to isolate stablecoin reserves from issuer bankruptcy risks
These provisions are designed to make stablecoins and other digital assets safer for both retail and institutional users, and to close regulatory gaps that have been blamed for past market abuses.
Institutional Trading Ban Set to Be Lifted
Another crucial component of South Korea’s crypto strategy is the removal of the longstanding ban on institutional cryptocurrency trading. Authorities are preparing to allow corporations and professional investors to gain direct exposure to crypto assets under strict conditions.
Local reports indicate that the FSC is weighing a rule that would cap corporate investments in cryptocurrencies at 5% of a company’s equity capital. Under this proposal, eligible firms could allocate up to that threshold per year, giving institutions room to diversify into digital assets while limiting systemic risk.
For asset managers and corporations, this development could open the door to new investment strategies, including:
– Strategic holdings in major cryptocurrencies
– Participation in tokenized capital markets and on-chain yield products
– Hedging or treasury diversification using regulated digital instruments
Why Tokenization Matters for South Korea’s Markets
Tokenized securities are not simply a new buzzword; they represent a structural change in how ownership, settlement, and compliance can be managed. For South Korea, a country with advanced technology infrastructure and a highly active retail investor base, formalizing STOs offers several potential advantages:
– Fractional ownership: High-value assets—such as real estate or infrastructure projects—can be split into small digital units, making them accessible to more investors.
– Faster settlement: DLT allows near-instantaneous transfer and settlement, potentially reducing counterparty risk and operational costs.
– Programmable compliance: Rules around who can buy, sell, or hold specific tokens can be embedded directly in smart contracts, improving enforcement of regulations such as investor qualification and lock-up periods.
– 24/7 markets: Unlike traditional exchanges, tokenized platforms can operate around the clock, aligning with the always-on nature of the broader crypto ecosystem.
By embedding these capabilities into a formal legal regime, South Korea aims to turn what has been a gray area into a regulated and scalable market segment.
Balancing Innovation With Investor Protection
The design of the new framework reflects South Korea’s attempt to strike a balance between encouraging financial innovation and limiting the speculative excesses often associated with crypto markets.
On one hand, regulators are opening space for tokenized securities, crypto ETFs, and institutional involvement. On the other hand, they are:
– Tightening rules on issuers and intermediaries
– Imposing clear liability standards and safeguarding mechanisms
– Setting quantitative limits on corporate exposure to digital assets
This dual approach is meant to ensure that STOs and other digital instruments grow under the same principles that govern traditional securities: transparency, fair dealing, adequate disclosure, and strong oversight.
What Market Participants Should Expect Next
Banks, brokerages, fintechs, and prospective STO issuers now have a defined, though not yet active, roadmap. In the run-up to 2027, they will need to:
– Upgrade or build technology systems to interface with approved DLT platforms
– Adjust compliance frameworks to reflect the new classification of tokenized securities
– Develop new products—such as tokenized bonds, equity slices, or revenue-sharing contracts—that leverage the benefits of on-chain issuance
For investors, the coming years are likely to bring a gradual but visible increase in regulated digital investment options, from tokenized versions of familiar products to entirely new structures enabled by smart contracts.
Positioning South Korea in the Global Tokenization Race
Globally, financial centers are racing to define how tokenized assets will fit into existing legal and market infrastructures. By codifying a dedicated framework and aligning it with broader crypto regulation, South Korea is signaling that it intends to be competitive in the next phase of capital market innovation.
If the implementation proceeds as planned—supported by robust infrastructure, effective oversight, and clear rules for market participants—the country could emerge as a leading hub for regulated tokenized securities in Asia, bridging the gap between traditional finance and the digital asset economy.