South Korea launches three-phase roadmap for tokenization of financial securities

Seoul is no longer tinkering. The Financial Services Commission (FSC), the South Korean financial regulator, presented to its joint public-private committee a three-step roadmap to transition the issuance and circulation of financial securities to a distributed ledger (blockchain). Stocks, bonds, funds: tokenization will not be limited to fractional investment products, it targets the heart of the Korean capital market. The calendar is based on a text. The reform of the law on the electronic registration of shares and bonds will come into force on February 4, 2027 and will legally recognize security tokens as a digital form of financial securities. The first wave of tokenized emissions will begin immediately.

Key Points

South Korean FSC adopts three-phase roadmap, backed by reform of electronic securities registration law, effective February 4, 2027

Phase 1: monetary funds and bonds reserved for institutions, unlisted shares via trust, fractional investment securities offered to the public

Ceilings for individuals: 30 million won per subscription (approximately 19,000 euros) and 100 million won in annual net purchases per over-the-counter platform

The third phase provides for an on-chain payment infrastructure backed by stablecoins, pending Korean legislative debate

Stocks and bonds soon to be offered in the form of tokens

The roadmap provides for three stages. The first will begin in February 2027 with a limited number of products: private money market funds and bonds reserved for institutional investors, unlisted shares held through a trust and fractional investment products accessible to the public.

Fractional investing allows you to divide an expensive asset into small parts. Instead of purchasing a building, a work of art or musical rights alone, several investors can acquire a fraction of it. South Korea already controls this market, particularly since the reclassification of the rights to music royalties offered by Musicow in 2022 into financial securities.

During the second phase, tokenization will be extended to all titles offered to the public. A tokenized share or bond will retain the legal nature of a financial security: the blockchain will essentially be used to record its ownership and transfers.

The networks used must be connected to the infrastructures supervised by the Korea Securities Depository (KSD), the country's central depository. These will therefore not necessarily be tokens freely exchangeable on the same platforms as Bitcoin or Ethereum.

Limits for individuals before the arrival of stablecoins

The FSC provides several safeguards. For certain fractional investments, it recommends that an individual subscription does not exceed 30 million won, or approximately 19,000 euros, or 5% of the total amount of the issue if this threshold is lower.

A part of the public offerings must also be reserved for individuals in order to prevent the wealthiest investors from absorbing all the available securities. On each platform specializing in over-the-counter exchanges, an individual's net purchases will be capped at 100 million won per year, or around 62,000 euros.

The reform will not impose a new general license on all professionals. Already approved financial companies will be able to offer tokenized securities within the limits of their current authorizations. However, issuers wishing to manage their clients' accounts themselves must have at least 4 billion won in equity, dedicated teams and sufficiently secure IT systems.

The last phase should make it possible to connect these markets to a payment infrastructure using stablecoins. In practice, a title and its payment could then be transferred to the blockchain during the same operation.