• South Korea’s Financial Services Commission has provided guidance on how to define security tokens, bringing the country in line with other jurisdictions within Asia.
• The onus will now be on firms to self-regulate accordingly.
• Traditional securities firms have responded positively and are beginning to join alliances in order to inform investors of the benefits of token securities.
South Korea Clarifies Security Token Definition
South Korea’s Financial Services Commission (FSC) has provided clarity on how security tokens should be defined, bringing the country in line with other jurisdictions within Asia. The guidance requires interested parties, such as issuers and brokers, to determine whether or not a token is a security. This puts the responsibility onto firms to self-regulate accordingly.
Positive Response from Traditional Securities Firms
Traditional securities firms have responded positively and are beginning to join alliances in order to inform investors of the benefits of token securities and set standards and best practices for issuing and trading. One example is Shinhan Investment & Securities, one of South Korea’s largest securities companies, which has invited other companies to join an alliance for this purpose.
Alignment with Other Jurisdictions
Angela Ang, senior policy advisor at blockchain intelligence firm TRM Labs and former regulator at Singapore’s Monetary Authority said that South Korea’s approach is “broadly aligned” with those taken by regulators such as Singapore and Hong Kong. She added that this regulatory clarity “should encourage digital asset innovation in South Korea’s capital markets”.
Reaction from Crypto Exchange Executives
A crypto exchange executive who requested anonymity said that while traditional finance players had been cautious about entering the market due to similar regulation existing in the US, they have hope for it but do not expect it will greatly impact their business.
The new guidance provides some much needed clarity for both traditional financial institutions as well as crypto exchanges operating within South Korean borders. It also represents an encouraging step forward towards broader acceptance of digital assets among mainstream investors within the country – something which could lead to increased investment opportunities for all parties involved going forward.