New Security Token Market Draws Attention from Financial Firms and Major Corporations

Financial firms and major corporations are closely monitoring the emergence of a potential new market as the government moves forward with preparations to revise the Act on Electronic Registration of Stocks and Bonds and the Financial Investment Services and Capital Markets Act. The objective is to establish the institutional framework for the issuance and distribution of security tokens, following the “plan to overhaul the security token issuance and distribution system” announced in February.

As part of the revision process, the Act on Electronic Registration of Stocks and Bonds will be amended to acknowledge distributed ledger technology as a method for digitizing securities, and this revision will also encompass the establishment of an issuer account management agency. Additionally, the revised Financial Investment Services and Capital Markets Act is expected to introduce provisions for the establishment of an over-the-counter transaction brokerage business and the permission for the distribution of atypical securities.

After completing parliamentary legislative discussions, the Financial Services Commission anticipates that the new security token system will be introduced by the end of 2024. However, specific details, such as the requirements for approving over-the-counter transaction brokerage and establishing a digital securities market, will be finalized after gathering additional input from stakeholders during the reorganization of sub-regulations following the revision of the laws.

Based on predictions from the Hana Financial Management Research Institute, once the issuance and distribution of token securities begin, the market capitalization is projected to be around 34 trillion won in the first year, with expectations of tripling to 119 trillion won by 2026 and reaching 367 trillion won by 2030. This remarkable growth, equivalent to approximately 14.5% of GDP, is attributed to the convenience and cost-effectiveness of transactions, as well as the potential to securitize a wide range of assets, including real estate, art, copyrights, and intellectual property rights.

However, concerns were raised during a public hearing held on July 13 regarding potential limitations for ordinary private investors. These concerns are related to proposed investment limits in the over-the-counter market, which are designed to protect private investors from high-risk investments.

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