South Korea Unveils Framework for Tokenized Stocks and Bonds

The Financial Services Commission (FSC) of South Korea has proposed rules that would bring stocks, bonds, and funds within its regulated token securities framework. The framework would allow traditional securities to be issued in a tokenized form on a distributed ledger, but the regulator has clarified that this does not make them separate crypto assets.

The rules also include a 100 million won annual net purchase limit per OTC platform for retail investors. Qualified issuers will need at least 4 billion won in equity capital to directly manage tokenized securities accounts. The FSC has instructed the Korea Securities Depository (KSD) to review participating networks against technical standards covering ledger participants, consensus systems, record preservation, system failures, and business continuity.

The regulator plans a three-stage rollout of its tokenization roadmap, with privately placed money-market funds and bonds for institutional investors, trust-based tokenization of unlisted shares, and publicly offered fractional investment securities in the first stage. Publicly offered traditional securities are planned for a later stage after authorities assess the first phase.

The framework will not replace the existing electronic securities system but use a hybrid approach initially, particularly for unlisted shares, where some shareholder rights continue to be managed through existing securities infrastructure while tokenized trust interests can operate through distributed-ledger systems. Financial firms have begun building tokenization products before the law takes effect.