South Korea, one of the world’s largest cryptocurrency markets, has taken a significant step towards regulating the digital asset sector.
The country’s Financial Services Commission (FSC) has issued guidelines that classify blockchain-based tokens as securities if they possess certain characteristics defined in the Capital Markets Act.
The Capital Markets Act defines securities as financial investment instruments that do not require additional payments from investors beyond the initial investment.
This includes cryptocurrencies or digital assets that provide a stake in the operation of a business, the rights to dividends or residual property, or have the issuer attribute profits generated from the business to investors.
The FSC stated that the security-like characteristics of cryptocurrencies and other digital assets will be determined on a case-by-case basis, with issuers and brokers such as crypto exchanges being held responsible for making such evaluations in line with the regulations.
Cryptocurrencies or digital assets that possess the characteristics of securities will be regulated under the Capital Markets Law, while those that do not will be governed by regulations for digital assets that are currently being prepared.
The FSC’s guidelines are aimed at preparing the financial sector for the upcoming legalization of the issuance and distribution of securities tokens.
The regulatory body plans to allow entities to directly issue such tokens without financial institutions and establish an over-the-counter market for such tokens.
The FSC will submit a proposal to incorporate these updates into existing financial laws in the first half of 2023.
In line with the new guidelines, Shinhan Securities, the largest securities company in South Korea by net profit, has formed the “STO Alliance” to expand the securities tokens ecosystem.
In conclusion, South Korea’s new guidelines for defining cryptocurrencies as security tokens are a major step towards the regulation of the digital asset sector.
The move is expected to boost growth and innovation in the cryptocurrency industry while providing greater legal certainty and protection for investors.
