South Korea issues guidance on security tokens, details inside

• South Korea’s financial regulator has issued a set of guidelines outlining which types of digital assets will be considered and regulated as securities in the country.
• By amending its Electronic Securities Act, the FSC will also permit security token offerings (STOs).

In a press release shared on 6 February, the Financial Services Commission (FSC) of South Korea has issued a set of guidelines outlining which types of digital assets will be considered and regulated as securities in the country.

It emphasized that digital assets that meet the requirements outlined in the country’s Capital Markets Act will be treated as securities.

Securities are defined by the law as financial investments in which investors are not required to make additional payments after their initial investment.

The FSC also gave examples of digital assets that are likely to be classified as securities. According to the FSC, this could include tokens that give holders a stake in business operations, rights to dividends or residual assets, or profit to investors.

Bitcoin and Ethereum (ETH), crypto tokens with no centralized issuer, will not be considered securities.

By amending its Electronic Securities Act, the FSC will also permit security token offerings (STOs).

Cryptocurrencies that meet the definition of security tokens will be governed by the Capital Markets Law of the country. Meanwhile, digital assets that do not meet the definition of securities will be subject to new regulations.

According to the FSC, token issuers and brokers such as crypto exchanges will use the regulations to determine which crypto will be classified as securities. The regulator also stated that the evaluation will be done on a case-by-case basis.

South Korea plans to become the global crypto center

The financial regulator also stated that the new guidance is part of South Korea’s preparations for the legalization, issuance, and distribution of security tokens.

South Korea has been an active participant in the cryptocurrency ecosystem for quite some time. On 19 January, the city of Busan announced plans to establish a decentralized digital commodities exchange.

According to government officials, the platform will go live this year. On 29 January, the South Korean government announced the implementation of a tracking system to combat money laundering and recover funds associated with criminal activities.