FSC: "Tokenization of Stocks, Bonds, and Funds Possible from February Next Year"

Amendments to Subordinate Regulations under the "Security Token Offering (STO) Policy Direction"

Starting in February of next year, not only fractional investment securities but also stocks, bonds, and funds will be eligible for tokenization. In addition, to reflect changes in the distribution market that arise when bonds are tokenized, a new approval category for over-the-counter (OTC) markets dealing with debt securities will be created.

The Financial Services Commission announced on October 1 that it will conduct a legislative notice process for revisions to the “Enforcement Decree of the Capital Markets Act” and the “Enforcement Decree of the Electronic Securities Act,” starting from October 2 until November 11. These revisions are part of the subordinate legal amendments following the "Tokenized Securities (STO) Policy Direction" announced on September 4.

Through these amendments, the Financial Services Commission will expand the types of securities eligible for tokenization beyond fractional investment securities to include existing standardized securities such as stocks, bonds, and funds. As for distributed ledger requirements, in addition to electronic registration institutions, at least two account management institutions must participate as distributed ledger participants, and it will be prohibited to directly pay fees for using the distributed ledger for electronic registration. The amendments also include a system allowing securities issuers themselves, in addition to existing account management institutions, to directly manage accounts. The registration requirements for issuer account management institutions include a minimum capital of 4 billion won, at least one specialized account management personnel, one internal control personnel, and two IT professionals.

The amendments will also establish a new approval category for OTC exchanges. In response to changes in the bond distribution market due to tokenization, an approval category for debt securities will be created in addition to those for unlisted stocks and non-monetary trust beneficiary securities. The Financial Services Commission will limit the annual net purchase amount by general investors on each OTC exchange to a maximum of 100 million won.

These amendments will take effect on February 4 of next year, following the legislative notice period, approval by the Financial Services Commission, and review by the Ministry of Government Legislation.

A representative from the Financial Services Commission stated, "We will discuss opinions raised by the industry and others regarding the tokenized securities policy direction announced on September 4 through the official legislative process."

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