The Security Token Issuance and Distribution Regulation System Improvement Plan’ was recently announced by the Financial Services Commission of Korea. This plan acknowledges that security tokens, which were previously confined to virtual asset fences. Have now entered the institutional capital market.
To address this. The Commission has made the decision to revise the Capital Markets Act starting from early 2020 and introduce the Token Securities Issuance (STO) system. Through token securities issuance investors will have access to various rights, including piece investment options that are not currently offered through electronic security forms on existing platforms.
Demystifying Security Tokens: Understanding their Nature and Function in the Financial Market
The issuance of security tokens involves using distributed ledger technology to create digital assets that serve as an alternative form of investment. These tokens have been introduced to simplify and streamline investment processes for interested investors looking for additional opportunities in their portfolios . Similar to traditional securities these tokens offer investors rights that align with current legal frameworks emphasizing equal investor protection. adherence to disclosure requirements, sales regulations , and other market specific guidelines outlined in the Capital Markets Act supports this commitment to protection.
Tokens or coins that don’t meet the criteria for securities classification will fall under regulation through the forthcoming Framework Act on Digital Assets instead. The ability for individuals to launch security tokens independently in Korea without seeking involvement from a security company is enabled by distributed ledger technologys capability to ensure record integrity and prevent any manipulation threats .
Regulatory Measures in Korea: The Government’s Plans to Regulate the Security Token Market
To cater to smaller investors who may face difficulty accessing large stock markets the Financial Services Commission of Korea has authorised a specialised over the counter transaction brokerage business. This new platform is tailored to facilitate the trading of investment contracts non cash trust holdings and other beneficiary certificates in our niche distribution market. Relying on atypical securities allows us to better serve our target audience . The Commission anticipates that these adjustments will lead to an increase in opportunities for investors .
In an effort to uphold integrity and protect investor interests. The Korea Exchange (KRX) is introducing a digital stock market that offers extensive trading options for security tokens through an accredited infrastructure. To prevent any potential conflicts of interest from arising. There will be restrictions concerning issuing, acquiring, and arranging security brokerage services . Clear differentiation between issuance and distribution is also emphasised by prohibiting self contracts from being used interchangeably between these processes . Measures have been implemented to ensure investor safety during over the counter trades, such as the imposition of an annual investment limit for ordinary investors .