South Korea Legalizes Tokenized Securities in Regulatory Boost for Digital Assets

South Korea has taken a major regulatory step by legalizing tokenized securities. The National Assembly approved amendments to the Capital Markets Act and the Electronic Securities Act during a plenary session. This action integrates blockchain-based assets into the country's formal financial system, allowing for the issuance and trading of tokenized securities.

The new framework is scheduled to take effect in January 2027. It enables eligible issuers to create digital securities using distributed ledger technology. These securities can represent stocks, bonds, and real estate. Issuance will follow existing financial rules.

The Electronic Securities Act now recognizes blockchain-based securities as lawful instruments. This change allows digital records to replace traditional paper-based systems. Authorities stated the system integrates with current financial infrastructure.

Trading of tokenized securities will occur through licensed brokerages. Financial intermediaries will manage transactions under existing investor protection rules. This structure keeps tokenized assets within regulated markets.

The Financial Services Commission (FSC) emphasized the importance of smart contracts in the new framework. "We expect token securities to enable distributed ledger-based securities account management," the FSC said. The agency also noted an increase in the use of smart contracts.

South Korea's regulatory development follows recent updates in its digital asset sector. The FSC confirmed finalized rules allowing corporate and institutional digital asset trading. These changes ended nearly nine years of restricted corporate participation.

Analysts predict rapid growth in the tokenized securities market. Boston Consulting Group estimates the domestic market could reach $249 billion by 2030. Other financial institutions also project growth in international tokenization markets.

Why Did This Happen?

The move aims to support innovation while keeping existing market structures intact. Lawmakers want to ensure that the financial system remains stable as it integrates new technologies.

The new laws allow for the legal recognition of tokenized securities. This recognition is crucial for ensuring that digital assets are treated similarly to traditional securities.

The FSC stated that the new framework supports account management through distributed ledgers. It also allows automated processes during issuance and settlement.

How Did Markets Respond?

The market response to the new laws has been positive. Analysts expect the tokenized securities market to grow rapidly as the law takes effect in 2027.

Investors are looking for clarity and regulation in the digital asset space. South Korea's move provides a clear framework that supports both innovation and stability.

The new framework also includes provisions for investor protection. Financial intermediaries will manage transactions under existing rules, ensuring that tokenized assets remain within regulated markets.

What Are Analysts Watching Next?

Analysts are watching for the implementation of the new laws. The FSC will lead the implementation, working with the Financial Supervisory Service, Korea Securities Depository, and industry stakeholders.

The FSC will establish a "Token Securities Council" to support the full implementation of the system. The council will involve key industry participants and focus on developing the necessary infrastructure and systems for secure tokenized securities transactions.

The new framework also includes a 12-month preparation period before the law takes effect. During this time, the FSC will work with industry stakeholders to ensure the system is ready for implementation.

Overall, South Korea's move to legalize tokenized securities is seen as a significant step in the country's digital asset strategy. The new framework is expected to position South Korea as a leader in the global tokenized securities market.