Introduction of STO System to the Korean Market—”Blue Ocean” for Securities Companies

The entry of securities tokens (STO) into the system is expected to be initiated this month. The securities industry is also preparing to expand its business operations accordingly.

According to the financial authorities and the financial investment industry on the 5th, guidelines for security tokens will be announced at the 6th Financial Regulatory Innovation Conference scheduled to be held in January. As the Digital Asset Basic Act continues to be held in the National Assembly to be passed, the Financial Services Commission is releasing its own separate guidelines to guide business operators.

Security tokens refer to securities issued in the form of tokens using blockchain technology. Unlike general virtual assets such as Bitcoin and Ethereum, securities that are issued and distributed using blockchains must comply with the Capital Markets Act. Since it is possible to make segment investments in various assets such as real estate, artworks, and stocks. It is also characterized by lower risk than other digital assets because it is based on real value.

Recently, incidents and accidents are emerging one after another in the domestic and overseas virtual asset markets, and for this reason, the market is keenly waiting for the guidelines for security tokens. Especially for investors, this would mean the introduction of investor protection measures to the market. The head of the Financial Services Commission (FSC) commented, “We will strengthen the risk management capabilities of financial companies related to digital finance, which is completely changing the financial ecosystem.” He also mentioned that the regulatory system will also be revised to foster a sound development of new investment methods such as segment investment and security tokens.

Related institutions and organizations have also started preparation for the STO introductions. The Korea Exchange is planning to open a digital securities market, which would be handling security tokens trading. The Korea Financial Investment Association, which is preparing to establish an alternative trading system (ATS) with securities firms, is also reviewing whether the ATS will also handle STO transactions.

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