South Korea has finalized comprehensive rules for tokenized securities that will bring stocks, bonds and funds into its regulated token securities framework. According to reports from the Financial Services Commission, the framework treats token securities as securities built on distributed ledger technology rather than separate crypto assets, ensuring existing capital market rules apply when securities are issued in tokenized form. The regulatory framework is scheduled to take effect nationwide on February 4, 2027, following amendments to the Electronic Securities Act and Capital Markets Act that passed the National Assembly in January. The Financial Services Commission has spent 2026 developing the technical, issuance and trading rules needed before the laws become operational. The shift allows the use of blockchain technology to issue and circulate stocks, bonds, and other fund offerings, adding many more types of financial instruments that can be issued via a blockchain.
Under the finalized Capital Markets Act rules, retail investors face a 100 million won annual net purchase limit per token securities OTC platform, approximately $72,000. As reported by the Financial Services Commission, this limit applies on a platform-by-platform basis and measures net purchases during the year by subtracting total annual sales from total annual purchases. The framework includes new OTC authorization categories covering debt securities alongside unlisted shares and non-monetary trust beneficiary certificates, with approved venues remaining subject to surveillance requirements for unfair trading and market conduct violations. The Financial Services Commission plans to create another OTC exchange licensing category specifically for debt securities, adding it to the framework already designed for unlisted shares and non-monetary trust beneficiary certificates.
The Korea Securities Depository (KSD) will serve as the central anchor point to connect the traditional financial system to distributed ledger technology, providing a crucial infrastructure bridge. According to the Financial Services Commission, the framework requires participation of at least two account management institutions in addition to the electronic registration institution, with issuer account management institutions also allowed to participate to ensure reliability of distributed-ledger records. For distributed-ledger infrastructure, the proposal requires a ledger to be shared across at least two account management entities, including eligible issuer account managers, alongside the Korea Securities Depository. This integration positions KSD to establish connections with blockchain networks like Avalanche, potentially opening new institutional investment channels for tokenized securities.
South Korea's institutional momentum is transitioning from creating physical infrastructure to creating the first customers for tokenized security. In February, the initial focus of the rollout will be on directing private money market fund (MMF) and corporate bond issuances to institutional investors, with twelve brokerages having signed on to join the KoSTO platform. KB Securities is integrating the Securitize and Optimism platforms into its existing relationship with institutional investors, conducting testing of the entire lifecycle of issuing, owning, and settling tokenized securities within a controlled environment. The first implementation stage beginning February 2027 covers privately placed money-market funds and bonds for institutional investors, trust-based tokenization of unlisted shares, and publicly offered fractional investment securities.
The Financial Services Commission will publish proposed revisions to enforcement decrees for public comment from October 2 through November 11. According to the Financial Services Commission, the revisions were drafted to set out details of the amended laws, which take effect on February 4, 2027. After the public comment period, the revisions will go through FSC approval, a review by the Ministry of Government Legislation, and vice ministerial and cabinet meetings before taking effect. The framework includes new OTC authorization categories covering debt securities alongside unlisted shares and non-monetary trust beneficiary certificates, with approved venues remaining subject to surveillance requirements for unfair trading and market conduct violations. Financial firms are already preparing products around that schedule, with KB Securities' plan for tokenized funds with Securitize and Optimism starting with a proposed money-market fund for institutional investors.
