starting next January, South Korea's financial markets will enter a new phase: tokenized securities (STOs). the amendments to the Capital Markets Act and the Electronic Securities Act, which passed the plenary session of the National Assembly, lay the legal foundation for expanding the existing centralized securities management system to blockchain-based distributed ledger technology. this is considered a huge turning point that goes beyond the emergence of new products and fundamentally changes the way assets are securitized and the structure of capital raising. this report analyzes the background of the implementation of the Token Securities Act, key legal issues, and market changes that investors should be aware of.
1. what are token securities and their status under capital markets law?
security tokens are securities under the Capital Markets Act that are issued using distributed ledger technology. it has the same legal effect as existing physical securities or electronic securities recorded on a centralized server, but has the technical difference that the creation and transfer of rights are recorded on the blockchain network.
until now, large buildings in Gangnam, expensive artworks, and music copyrights have been inaccessible to the average retail investor, but with the implementation of the Token Securities Act, the era of fragmented investing has officially begun, where these illiquid assets can be sliced and diced and bought and sold as easily as stocks. previously, they were only allowed on a pilot basis in a limited environment called a regulatory sandbox, but now they are recognized as a formal financial investment product and protected within the system.
分类 traditional securities tokenized securities (STOs) recording method centralized ledger (e.g., depository)distributed ledger (blockchain)
eligible assets structured assets such as stocks, bonds, etcunstructured assets such as real estate, art, copyrights, etc
trading Units 1 share (relatively large) can be broken down into smaller increments (fractional investments) legal basis existing Capital Markets Actamendments to the Capital Markets Act and the Electronic Securities Act
2. key to the implementation of the Token Securities Act: Amendments to the Electronic Securities Act and the Capital Market Act
the biggest achievement of the amendments is the inclusion of blockchain technology within the scope of the law. previously, a stock purchase could only be legally recognized as a property right if it was recorded on the servers of a centralized organization called the Korea Securities Depository and Settlement Corporation. However, with the amendment to the Electronic Securities Act, tokens recorded on a distributed ledger are also recognized as authentic securities that prove one's property rights.
the amendment to the Capital Market Act also allowed the circulation of investment contract securities and non-monetary trust income securities. this paves the way for atypical securities that receive a share of the profits and losses of a joint business, such as an art exhibition business or a cattle farming business, to be freely traded on the OTC market.
for small and medium-sized enterprises and micro-enterprises, this is also an innovative way to raise funds. even small and medium-sized businesses that have difficulty obtaining bank loans or conducting large-scale IPOs will be able to raise funds by securitizing their ideas or assets and issuing token securities directly.
3. STO market size forecast and economic impact
south Korea's token securities market is expected to grow by leaps and bounds after the system is implemented in 2027. according to data from Boston Consulting Group (BCG) and the National Assembly Legislative Research Office, the market capitalization of the domestic STO market is expected to start at around KRW 34 trillion in 2024 and grow to KRW 367 trillion by 2030.
year estimated Market Size Percentage of GDP 2024 kRW 34 trillion1.5
2026 119 trillion won5.0
2028 kRW 233 trillion9.4
2030 kRW 367 trillion14.5 percent
these figures are equivalent to about 14.5% of South Korea's GDP, indicating the enormous impact of the digital transformation of capital markets on our economy. especially in Korea, where more than 75% of household assets are tied up in real estate, asset securitization through token securities will play a crucial role in diversifying household asset portfolios and providing market liquidity.
4. principles of structural separation of token issuance and distribution
the government has established the principle of strict separation of issuance and distribution to ensure the soundness of the token securities market. this is to prevent market manipulation and conflicts of interest that may arise if a particular entity issues securities and directly operates a market for trading them.
in the future, businesses that meet certain requirements will be able to register as an issuer account management organization and issue token securities directly without going through a securities company. however, trading of these securities must be done through a separate over-the-counter broker that is authorized by the financial authorities.
to use an analogy from the movie industry, it is like legally separating the production companies that produce movies from the theaters that show them to establish a fair distribution order [User Input]. such a structural device would serve as a key legal mechanism for investor protection.
5. analyzing Fragmented Investment Mechanisms by Major Assets
one of the areas that will be most active with the implementation of the Token Securities Act is fragmented investments. sculpture investments are broadly divided into investment contract securities and non-monetary trust return securities, each of which has different investment methods and risk structures depending on their characteristics.
art and Korean Beef Sculpture Investment (Investment Contract Securities)
real assets such as artworks, luxury goods, and Korean cattle are mainly issued in the form of investment contract securities. this is a structure in which multiple investors invest funds in a joint business and share the profits and losses of the operation. under the amendment, it will be possible to buy and sell these securities through securities companies, which will dramatically improve investment accessibility.
real Estate and Music Copyright Fractional Investments (Income Securities)
large assets, such as real estate, are often held in the form of non-monetary trust income securities. a trust manages the asset and tokenizes and distributes the rents or profits it generates. because they use a trust, they are considered to be relatively safer than investment contracts because of the insolvency insulation that protects the assets from the risk of the issuer's bankruptcy.
asset Types security Classification main Return Model real estate non-monetary trust income securitiesrental income, sale proceeds
fine Art/Jewelry investment Contract Securitiessale proceeds, exhibition proceeds
sound recordings non-monetary trust beneficial interest securitiescopyright fee revenue
korean beef investment contract securitiesproceeds from sale
6. sTO consortiums from securities firms and financial institutions are gearing up
large securities firms are already working hard to build technical infrastructure and establish partnerships ahead of the official implementation in 2027. they are partnering with telecommunications companies and fintech companies to develop integrated platforms that can handle the issuance and distribution of token securities in one step.
one of the most advanced is Mirae Asset Securities, which has formed the Next Finance Initiative (NFI) with Hana Financial Group and SK Telecom. they plan to complete the development of their own tokenized securities mainnet and provide differentiated strategy consulting and issuance infrastructure.
shinhan Investment & Securities, together with SK Securities and LS Securities, operates a council called PULSE. pULSE is characterized by providing distributed ledger services that maximize security levels while reducing initial investment costs through a cloud-based subscription model. other large firms, such as NH Investment & Securities and KB Securities, have also secured their own platforms and partners, and are ready to take the lead in the market.
7. tax and risk management strategies investors should know
while tokenized securities represent a new investment opportunity, they also present unique risks. investors should not only look at profitability, but also the tax regime and the safety of their assets.
tax regimes and taxes
the taxation system for tokenized securities is currently under discussion, but it is likely that dividend income tax will be applied to ordinary income. in-platform revenues such as music royalties are likely to be classified as dividend income, and in the case of artworks, other income tax (22%) may be imposed on capital gains exceeding KRW 60 million. more clear guidelines will be provided in the future in conjunction with the implementation of virtual asset taxation in 2027.
risk Factors
the biggest risk is the potential loss of principal. if the value of real-world assets declines, the value of your tokens will also decline. it is also important to note that tokens may be less liquid than stock markets, making it difficult to cash out immediately when you want to (convertibility constraints). in particular, non-financial assets may be difficult to objectively value, which may lead to information asymmetry.
risk type details countermeasures value fluctuationdecline in the market price of the underlying asset (real estate, art, etc.)
check asset valuation reports and diversify investments lack of liquiditydifficulty selling due to low trading volume in OTC markets
choosing a recognized platform and blue-chip assets legal uncertaintyconfusing infrastructure and regulatory application at the beginning of the scheme
use of institutionalized authorized entities (OTC brokers)8. FAQ: Key Questions on the Implementation of the Token Securities Act
Q1. What is the difference between token securities and virtual assets (such as Bitcoin)?
token securities are securities backed by rights to real assets and are regulated by the Capital Market Act and have investor protections in place. in contrast, virtual assets such as Bitcoin are often not securities and their legal status is not yet as clear as token securities.
Q2. What is the investment limit for general investors?
the exact figure will be finalized through the enforcement decree, but it is expected that the annual investment limit will be set lower for investment contract securities with higher investment risk than for income securities. the industry is discussing a limit of KRW 10 million to KRW 30 million per person per year.
Q3. Where can I trade token securities?
once the system is implemented, token securities can be traded as conveniently as stocks through securities companies' HTS or MTS. they will also be available on separate distribution platforms operated by licensed OTC brokers.
Q4. Is there any risk of hacking with distributed ledger technology?
blockchain (distributed ledger) technology is highly secure as it is virtually impossible to forge data. however, there may be operational risks such as the security of the platform itself and private key management, so it is important to use a platform with proven technology.
9. conclusion and Future Prospects for the Capital Market
the implementation of the Token Securities Act signals the complete transition of the Korean capital market from analog to digital. when the system is fully implemented in January 2027, it will usher in an era of "tokenization of assets," where all the valuable assets around us, such as real estate, art, and content, will be securitized and traded. this will provide new monetization opportunities for investors and an efficient way to raise funds for companies and small businesses.
however, there are still challenges to overcome in the early stages of the market, such as system stability and taxation. therefore, investors need to understand the value of the underlying assets and approach them cautiously within institutional safeguards, rather than simply jumping in on the promise of new technology. it is time to start preparing now to become a major player in the token securities market, which is expected to grow to KRW 367 trillion by 2030.
key takeaways
with the enforcement of the Token Securities Act, the era of STOs will officially begin in 2027, allowing people to invest in real estate, art, and more. you will be able to prove your property rights with blockchain technology and easily trade on the stock exchange MTS. this market, which is expected to grow to 367 trillion won in 2030, will become a new investment alternative for the MZ generation and a source of financing for small businesses.
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