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Capital markets tokenization in Korea is moving beyond fractional investment. On October 6, 2026, the Korea Capital Market Institute (자본시장연구원, “KCMI”), a capital markets research institute, published an issue report reviewing how tokenization is being used in global capital markets and what Korea should do as it prepares to tokenize conventional securities. The report states that its views are those of the author and not KCMI’s official position.
For foreign asset managers, infrastructure providers, and digital asset businesses looking at Korea, the report is a useful guide to where adoption is likely to start. Its central message is that tokenization spreads first in established products, in operations where the efficiency gains are clear, and through trusted market infrastructure.
Korea’s Debate Is Shifting to Conventional Securities
Korea’s token securities discussion has so far centered on fractional-investment products, such as non-monetary trust beneficiary certificates (비금전신탁 수익증권) and investment contract securities (투자계약증권) backed by real estate, art, or intellectual property. The report notes that this focus has served investor protection, but differs from global markets, where tokenization has grown mainly around conventional financial products.
That gap is narrowing. The amendments to the Electronic Securities Act (전자증권법) and the Financial Investment Services and Capital Markets Act (자본시장법, “FSCMA”) take effect on February 4, 2027. On September 4, 2026, the Financial Services Commission (“FSC”) announced a phased plan to extend tokenization to shares, bonds, and funds. The first phase covers private money market funds and private bonds for institutional investors, together with unlisted shares tokenized through a trust structure. Public offerings and on-chain settlement infrastructure are to follow in later phases. The FSC has since released draft implementing rules for the regime.
Three Patterns in Global Tokenization
The report identifies three features of how tokenization has spread so far.
Established products come first. Most regulators take a technology-neutral approach: a tokenized security is regulated according to its economic substance, not its technical form. The U.S. Securities and Exchange Commission (“SEC”) stated in January 2026 that issuing a security in token form does not change how federal securities laws apply. Tokenizing a bond or fund is therefore closer to changing how a familiar product is recorded and transferred than to designing a new one. The report also cautions that making an asset tradable is not the same as making it liquid. Liquidity still depends on an investor base, reliable valuation, disclosure, and price discovery.
Adoption is selective. Tokenization is spreading where existing processes are fragmented across many institutions and require repeated reconciliation, such as collateral management, fund administration, and bond issuance and settlement. It is concentrated in wholesale, institution-to-institution markets and post-trade operations rather than in new retail products. Listed equity markets, which are already highly efficient, have seen less adoption.
Market infrastructures are at the center. Rather than bypassing central securities depositories and clearing houses, tokenization is being built around them. The report cites the Depository Trust & Clearing Corporation’s Tokenization Service, scheduled to launch formally in October 2026, as well as Eurex Clearing’s DLT-based collateral service and the DLT platforms of Euroclear (D-FMI) and Clearstream (D7).
Where Tokenization Is Working: Collateral, Repo, Funds, and Bonds
Collateral and repo. Tokenized collateral can be located, transferred, and substituted more quickly, which reduces the need to hold excess collateral as a buffer. In repo, DLT allows intraday transactions priced by the hour or minute. According to the report, Broadridge’s Distributed Ledger Repo platform processed an average of USD 357 billion per day in June 2026, and JP Morgan’s Kinexys offers intraday repo. The report also notes that regular commercial use is still largely limited to these two platforms, which are not connected to each other.
Tokenized money market funds. Short-term government debt funds are the most commercially advanced area of fund tokenization. As of the end of July 2026, the report lists Franklin Templeton’s BENJI at about USD 0.7 billion, Circle’s USYC at about USD 3 billion, and BlackRock’s BUIDL at about USD 2.7 billion. These funds increasingly serve as yield-bearing cash management and collateral in digital asset markets. The report flags risks as well, including a mismatch between 24-hour on-chain redemption requests and traditional market settlement hours, and closer links with stablecoin markets.
Bonds. Bond tokenization has moved from one-off pilots to repeat issuance. Hong Kong has issued tokenized green bonds each year since 2023, and the report cites global tokenized bond issuance of EUR 4.73 billion in 2025. Several Korean issuers, including Mirae Asset Securities, POSCO International, the Korea Housing Finance Corporation, and KB Kookmin Bank, issued tokenized bonds in Hong Kong in 2026.
Listed Equities: Slower and Structurally Different
The report distinguishes two developments in equity tokenization.
The first is stock tokens offered to retail investors on digital asset platforms. These are typically issued by a third party unrelated to the company whose shares they track. Legally they are structured notes or certificates linked to the economic performance of the underlying shares, not shares themselves. Holders are not shareholders and have no voting rights.
The second is tokenization within the existing exchange framework. The SEC has approved a Nasdaq rule change allowing eligible securities to trade in tokenized form on the same order book, and the NYSE has filed a comparable rule. In September 2026, the SEC also issued a time-limited, conditional exemption allowing certain venues to support trading in tokenized stocks without registering as an exchange. The report notes, however, that atomic, trade-by-trade settlement sits uneasily with multilateral netting, which it estimates reduces the cash that must move in U.S. equity markets by about 98%. It expects listed equity tokenization to progress more slowly than collateral, funds, and bonds.
KCMI’s Recommendations for Korea
The report proposes three priorities for Korea.
- Regulatory clarity: The basic legal framework is in place, but specific business models will raise questions about licensing, the roles and liability of participants, custody of token securities, and links between DLT platforms and existing securities systems. The report points to the SEC’s December 2025 no-action letter for DTC’s tokenization service and to Hong Kong’s Tokenised Bond Expert Group as models for resolving these questions with market participants.
- Phased pilots, starting with government bonds: Government bonds involve the government, the central bank, the central securities depository, and institutional investors, and are widely used as collateral. The report notes that the Korean government plans a government bond tokenization pilot linked to a wholesale central bank digital currency in 2027, and that the United Kingdom is preparing its first digital gilt issuance by the first quarter of 2027.
- Market infrastructure and settlement: The report calls for the Korea Securities Depository and the Bank of Korea to set standards for using tokenized securities as collateral and to develop settlement in central bank money, while allowing deposit tokens and stablecoins to work alongside it.
What This Means for Foreign Market Participants
In our view, three practical points follow for foreign businesses considering Korea.
First, institutional products are likely to move first. Korea’s phase one targets institutional private funds and private bonds, which is consistent with the global pattern the report describes. Foreign asset managers and fund service providers with tokenized fund experience should track how these products are structured under Korean law.
Second, infrastructure partnerships will matter. Korea’s regime places the Korea Securities Depository at the center of distributed ledger registration, and the report expects market infrastructure to anchor tokenization. Technology and custody providers should plan on working within that structure rather than around it.
Third, equity-linked tokens deserve caution. Products that track listed shares without conferring shareholder rights are likely to be analysed as securities under the FSCMA, which raises offering, disclosure, and licensing questions before they can be made available to Korean investors.
Cha & Kwon advises foreign token projects, asset managers, and platforms on securities classification and market entry under Korean law. Our team authored the South Korea chapter of the Chambers Blockchain & Crypto-Assets 2026 Global Practice Guide, including its analysis of the 2026 capital-markets amendments and the token security framework.
Related reading: Korea’s Digital Asset Basic Act Delayed: How Stablecoin and STO Tracks Are Moving Separately — how Korea’s token securities legislation moved ahead on its own track.
Related reading: Listing a Token on a Korean Exchange: The Securities Opinion Every Foreign Project Needs — how Korean law decides whether a token is a security.
Related reading: Korea Crypto Law: Complete Legal Guide for Foreign Businesses & Investors — our hub covering VASP registration, CARF, STO regulation, and more.
Sources and further reading: Korea Capital Market Institute, Issue Report 26-14, The Spread of Capital Markets Tokenization: Major Overseas Cases and Tasks for Domestic Adoption (October 6, 2026), available at kcmi.re.kr.
Cha & Kwon Law Offices advises virtual asset businesses, fintech companies, and foreign investors on Korean regulatory compliance. For consultation, contact us at contact@chakwon.com or visit chakwon.com.
This article provides general legal information and does not constitute legal advice for your specific situation. Please consult qualified Korean legal counsel regarding your particular circumstances.