The FSC Officially Allows Security Token Issuance — Guidelines To Be Released This Month

[Executive Summary]

• The Financial Services Commission (FSC) approved the issuance of security tokens (STO) and plans to announce a regulatory system for the issuance and distribution of security tokens within this month. Under the current law, only physical securities and electronic securities are recognized for their right to presume and power to oppose a third party.

The Financial Services Commission (“FSC”) held the 6th Financial Regulatory Innovation Conference on the 19th of last month, approved the issuance of security tokens (STO), and plans to announce a regulatory system for the issuance and distribution of security tokens within this month.

The same principle as the “Fractional Investment Guidelines” announced in April last year will be applied to the process of determining which tokens shall be deemed securities. However, the detailed issuance and distribution regulatory system for security tokens will be announced through a separate guideline this month.

Under the current law, only physical securities and electronic securities are recognized for their right to presume and power to oppose a third party. The authorities partially amended the Act on Electronic Registration of Stocks to allow the distributed ledger as a method of recording electronic securities in the account book. This allows security tokens to have the same rights as that of the securities. In addition, the FSC plans to introduce an issuer account management institution to enable STO without going through a securities company if certain conditions are met.

The chairman of the FSC stated, “We will institutionalize an over-the-counter distribution platform so that token securities can be traded in a safe over-the-counter market equipped with investor protection devices.”

Since security tokens are treated as financial products under the Capital Markets Act, they cannot be traded on cryptocurrency exchanges other than financial investment companies. Therefore, if a token is listed on the cryptocurrency exchange, it can be traded after going through the delisting process from the virtual asset exchanges and the listing process in the digital stock market.

Read More: The Korean Ministry of Justice Plans To Introduce a Virtual Currency Tracking System