South Korea Adds Token Securities to Capital Market Reform Plan

South Korea has included token securities infrastructure in a wider capital market reform plan. The country is preparing rules and systems for blockchain-based securities, with the framework expected to take effect in February 2027. The move could bring tokenized securities closer to mainstream financial market infrastructure in South Korea.

South Korea Adds Token Securities to Major Capital Market Reform Plan

In order to improve South Korea's overall capital market and bring tokenized securities into the mainstream, the Korean government is making progress toward integrating token securities into its established financial system.

The Financial Services Commission (FSC) announced today that they have created an inter-agency working group called the Capital Market Infrastructure Review Meeting. This group will work together with various government agencies, regulators and industry representatives to develop recommendations regarding all aspects of modernizing South Korea's capital markets. Some of these areas include reducing the time it takes to settle transactions in securities; extending trading hours; increasing the application of AI-based technology; and developing new types of infrastructure for digital finance.

In addition, the FSC also noted that it will hold separate meetings with both private sector and public sector stakeholders to discuss how best to integrate token securities into South Korea's capital markets modernization efforts.

Overall, this action by the Korean government demonstrates that it considers tokenized securities as a component of improving South Korea's existing financial infrastructure and not just as another experimental form of cryptocurrency-based investing.

SOUTH KOREA LINKS TOKEN SECURITIES TO MARKET MODERNIZATION

South Korea is preparing to incorporate token securities into their Capital Markets Reform Agenda with the goal of creating a bridge between blockchain-based investment products and the existing mechanisms in place for settling and trading traditional securities. The use of distributed ledger technology allows for recording and transferring of owner rights. The FSC stated that they plan to develop a Road Map for decreasing the time it takes to complete a transaction (i.e. reduce the Securities Settlement Cycle) and anticipate that this will be completed by October. As part of this plan, there will be a Korea Securities Depository established to facilitate the clearing of OTC (Over-the-Counter) transactions involving fractional investment products and unlisted shares.

This process is anticipated to be operationalized by December 31, 2026. According to FSC Vice Chairman Kwon Dae-young, this new initiative will further enhance South Korea’s capital markets through the implementation of Four Policy Priorities: Building Trust; Protecting Shareholders; Encouraging Innovation; and Increasing Access to Markets.

TOKEN SECURITIES FRAMEWORK EXPECTED IN 2027

The drive by South Korea to issue tokenized securities started prior to the most recent capital market examination. In January, the National Assembly approved revisions to recognize blockchain-based distributed ledgers as legitimate securities registers.

Additionally, the revisions permit token security issuance and trading within the existing legal structure of the country. According to the FSC, the new token securities framework will become effective in February 2027. Regulators will be required to develop all of the necessary subordinate rules, guidelines, and supporting infrastructure prior to this date.

In addition to meeting with the public/private token securities council for the second time in May, the FSC stated that they plan to publish proposed subordinate regulations and guidelines in July.

SAMSUNG SDS BUILDS TOKEN SECURITIES PLATFORM

The technical infrastructure for the tokenized securities market in South Korea is currently under development.

In May, Samsung SDS announced they were awarded a contract by the Korea Securities Depository to develop an electronic securities management platform. This system would link the Korea Securities Depository's electronic securities accounting infrastructure to a blockchain-based data system.

It is anticipated that this platform will be ready for operation in February 2027, the same month when the South Korean government plans to implement the new regulatory framework for tokenized securities.

In addition to providing a basis for regulated tokenized securities, this infrastructure could provide a way to integrate blockchain-based records with existing financial markets.

SOUTH KOREA PREPARES FOR A DIGITAL CAPITAL MARKET

The FSC indicated that they would continue discussions about detailed token security proposals using the public-private council prior to adding them to the larger review of market infrastructure. South Korea's objective is to create an accessible, instantaneous, and connected digital market. To achieve this objective, it will upgrade its current capital markets system and develop regulatory frameworks for new types of regulated digital assets.

This reform will place South Korea within a group of nations developing methods to integrate blockchain technology into established financial institutions with regulatory oversight.