[Economy Pulse] Token Securities: From Fractional Investment to Financial System Innovation

On August 27, an intriguing transaction took place on the global electronic trading platform Tradeweb. Global market maker Virtu Financial conducted a repurchase agreement (repo) transaction, borrowing funds against digital government bonds as collateral and then repaying the loan. The entire process—from providing the collateral and receiving the cash, to buying back the securities—was executed on blockchain, taking less than 10 minutes in total.

Recent tokenization market data reveal a significant gap between how token securities are perceived in South Korea and the realities of the global market. According to RWA.xyz, as of early September, the total global market capitalization of stablecoins was approximately $303 billion. In contrast, tokenized stocks amounted to around $2.6 billion and tokenized real estate was roughly $500 million. The repo sector is especially noteworthy: Broadridge’s distributed ledger-based repo platform DLR handled $8 trillion in transactions in July alone, averaging $365 billion per day. Familiar concepts like real estate or artwork fractional investments still represent only a minor segment of the overall global tokenization market.

This divergence is largely due to differing perspectives on blockchain technology and the foundational design of institutions. In the United States, the financial market sees blockchain not primarily as a way to create new investment products, but as the next-generation infrastructure that upgrades existing financial 'plumbing.' By contrast, Korea’s initial token securities framework focused on technology for issuing and distributing new types of securities, prioritizing fractional investment and permissioned networks built around local financial institutions.

What global financial institutions seek in tokenization is not the fragmentation of assets, but the ability to transfer bonds, funds, cash, and collateral more quickly and to utilize overall liquidity in the financial system more efficiently. When securities and cash are transferred in real-time on blockchain, atomic settlement can occur—the moment the government bond is delivered, payment is simultaneously made. Collateral used in the morning can be reused in the afternoon. As a result, the same assets circulate more and less cash and collateral need to be set aside.

This impact is clear in the data. Analysis by global financial infrastructure company Broadridge and research firm Finadium indicates that converting only 15% of all transactions to blockchain-based repos could reduce the required intraday liquidity buffer by 8% to 17%. When the United States shortened the securities settlement cycle from T+2 to T+1 in 2024, the clearing fund of stock trading clearinghouse NSCC dropped by an average of $3 billion (23%). Faster settlement times mean that capital previously locked up against risk can now be used for other trades and investments, significantly boosting capital efficiency.

This is precisely why the Depository Trust & Clearing Corporation (DTCC)—the American counterpart to Korea Securities Depository—included not just equities but also government bond repos, securities lending, collateral provision, and central counterparty margin management in its tokenization live transaction tests in July. The core of the upcoming service, set to launch in October, is not simply putting securities on blockchain, but establishing the infrastructure that enables more efficient movement of financial assets.

The efficiency gap in financial infrastructure ultimately translates into differences in financial industry competitiveness. Financial institutions that can leverage the same capital and collateral more frequently are able to execute more trades and offer lower rates and fees. In essence, blockchain infrastructure competition is a race in capital efficiency.

South Korea must now move beyond the question of which real estate or content to tokenize, and consider how to bring conventional financial assets—such as government and corporate bonds, and funds—on-chain and utilize them for repos, securities lending, and other real financial work. Digital payment tools like stablecoins or deposit tokens should be linked in real-time and connected to global networks.

Fractional investment is a good starting point. However, the true value of tokenization lies not in how finely assets are divided, but in how efficiently it can transform the entire financial system and how much more productively the same capital can be used. If this transition is missed, it is not just the token securities market that will fall behind, but the overall competitiveness of South Korea’s financial industry.

Seo Byungyoon, Co-CEO of DSRV

This content was produced with the assistance of AI translation services.