South Korean regulator provides guidance on security tokens

South Korea established guidance that specifies which types of digital assets will be considered and regulated as securities in the country.

In a press release, the Financial Services Commission (FSC) highlighted that digital assets that fit the characteristics laid out in the country’s Capital Markets Act will be treated as securities.

The law considers securities as financial investments where investors are not required to make additional payments after their original investment. The FSC also provided examples of which digital assets will most likely be classified as securities. According to the FSC, this may include tokens that provide a stake in business operations, gives holders rights to dividends or residual assets, or provide profit to the investors.

Cryptocurrencies that fit the descriptions of security tokens will be regulated under the country’s Capital Markets Law. Meanwhile, digital assets that do not fit the characteristics of securities will be governed by other upcoming regulations.

According to the FSC, token issuers and brokers like crypto exchanges will evaluate which crypto will be classified as securities based on the regulations. The regulator also pointed out that the evaluation will be case-by-case.

The financial regulator also noted that the new guidance is part of preparations for the legalization, issuing and distribution of security tokens within the country.

South Korea has actively participated in the crypto ecosystem. On Jan. 19, the city of Busan revealed plans to establish a decentralized digital commodities exchange. Government officials noted that the platform would begin its operations this year.

Apart from this, the country’s Ministry of Justice also plans to deploy a tracking system for crypto. On Jan. 29, the South Korean government said it would introduce a tracking system to combat money laundering efforts and recover funds connected to criminal activities.