South Korea Moves to Legalize Tokenized Securities Amid Political Shift

The South Korean parliament is on the verge of approving a draft bill that would legalize tokenized securities, allowing domestic firms to issue blockchain-powered coins linked to various assets such as real estate, raw materials, livestock, and copyrighted works. This development comes as two bills proposing the institutionalization of tokenized securities are currently under review by the National Assembly’s Political Affairs Committee. These bills were drafted by lawmakers Min Byeong-deok and Kim Jae-seop.

The political landscape in South Korea has been in a state of deadlock since December of the previous year, when Yoon Seok-yeol attempted to impose martial law. However, with the recent inauguration of President Lee Jae-myung of the Democratic Party (DP), there is renewed hope for progress. The DP holds a significant majority in parliament, and senior party officials have repeatedly advocated for the legalization of security token offerings (STOs). This move would overturn a long-standing ban on public blockchain-based token issuances that has been in place since the end of the 2010s.

Industry insiders and lawmakers alike are optimistic that the National Assembly will swiftly turn its attention to STO regulations. The previous session saw both bills fail to pass due to external factors, including the political deadlock. However, the industry believes that much has changed since then, and there is a strong bipartisan consensus emerging to activate the STO market. This consensus is driven by the desire to diversify financial investment product offerings and boost financial inclusion, allowing the public to make micro-investments in assets such as real estate and art.

Scores of South Korean companies, including large financial providers, telecom giants, and leading tech companies, have been eagerly awaiting favorable legislation to launch their tokenized securities-related offerings. Yoon had repeatedly pledged to authorize STO approval but was unable to deliver on his promises. Domestic firms are hopeful that President Lee’s government will be more successful in this regard. The nation’s biggest securities companies are also pushing for the legislation to be fast-tracked, seeing it as a means to diversify their financial investment product offerings.

Despite the optimism, the political climate remains tense. The Democratic Party is pushing for several special prosecution laws to launch an inquiry into Yoon’s wife, Kim Keon-hee, who has been accused of various crimes. The opposition People Power Party has protested these moves, leading to disruptions in the National Assembly’s activities. Additionally, President Lee has vowed to launch a KRW-pegged stablecoin, claiming that it could help South Korea secure a position in the global stablecoin market.