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5 October 2026
On 4 September 2026, Korea’s Financial Services Commission (“FSC”) introduced a policy roadmap on the digital transformation of securities issuance and circulation at the third meeting of the private-public joint consultative body on the tokenisation of securities. The roadmap sets out Korea’s proposed approach to progressively integrating distributed ledger technology into its securities issuance, circulation and settlement infrastructure.
The policy direction is particularly significant because it moves beyond the initial focus on fractional investment products and outlines a phased strategy for the tokenisation of traditional financial instruments, including stocks, bonds and funds.
The roadmap is particularly relevant to financial institutions, asset managers, fintech companies and issuers exploring tokenisation initiatives in Asia, as it provides greater regulatory certainty regarding the issuance, distribution and trading of tokenised securities in Korea. Following the publication of the roadmap, on 1 October 2026 the FSC announced proposed amendments to subordinate regulations to implement key aspects of the new framework.
- Security Tokens Recognised as a New Form of Securities
The FSC reiterated that security tokens are not a separate asset class, but merely a different method of issuing and recording existing securities through distributed ledger technology (“DLT”). With the amendments to the Act on Electronic Registration of Stocks and Bonds scheduled to take effect on 4 February 2027, security tokens, or tokenised securities, will be legally recognised as a digitised form of securities.
Under the proposed framework, traditional securities such as shares, bonds and fund interests may be issued in tokenised form while retaining their existing legal characteristics. The proposed subordinate regulations announced on 1 October 2026 further confirm that the types of securities capable of being tokenised will include not only fractional investment securities, such as non-monetary trust beneficiary certificates and investment contract securities, but also existing standardised securities such as shares, bonds and fund interests. The use of distributed ledger technology is expected to enhance transparency and efficiency in the recording and management of securities ownership and transactions.
- Phased Development of Tokenised Securities Issuance Infrastructure
The FSC has adopted a phased approach to implementation in recognition of the operational and regulatory complexities involved in tokenising traditional financial products.
Phase 1 is scheduled to commence when the amended legislation takes effect in February 2027 and will focus on tokenisation of securities for:
- privately pooled money market funds (“MMFs”) and bonds exclusively reserved for institutional investors;
- unlisted shares through a trust structure; and
- publicly offered fractional investment products.
Implementation of the second and third phases will remain flexible, taking into account the outcome of the first phase, the pace of technological innovation among market participants and the progress of pending stablecoin legislation.
- Expansion of Fractional Investment Opportunities
The roadmap is accompanied by model standards governing fractional-investment products structured as non-monetary trust beneficiary certificates or investment contract securities.
For non-monetary trust beneficiary certificates, the standards would permit the pooling of underlying assets subject to specified conditions, including that the assets are of the same type, that the standards and purpose of the pooling are clearly identified, that distressed assets are excluded and that information concerning each underlying asset is provided. Future receivables may also be included where sufficient investor-protection measures are in place.
The FSC has proposed that the maximum subscription amount for an individual investor should be the lower of KRW30 million and 5% of the total issuance volume. It has also recommended establishing a specific retail allocation and reserving a minimum portion for equal distribution.
For investment contract securities, the existing investor-protection-focused screening process will remain in place. The authorities will conduct further studies on the circulation of equity-sharing investment contract securities and the issuance of business-project investment contract securities. The policy direction also broadens the scope of assets that may be used in fractional investment structures.
- Distribution and Trading Framework
There will be no separate authorisation regime exclusively for dealing in tokenised securities. Financial-investment business operators may handle tokenised securities within their existing licensed business areas, although prior consultation with the Financial Supervisory Service (FSS) will be required before undertaking the intermediation of tokenised-securities transactions.
The proposed subordinate regulations will establish an additional over-the-counter (“OTC”) licensing category for debt securities, alongside the categories applicable to unlisted shares and non-monetary trust beneficiary certificates. A corresponding category for investment contract securities may be considered following further study.
To protect retail investors, the proposed subordinate regulations set an annual net purchase limit of KRW100 million per retail investor on each OTC exchange, calculated as the total purchase amount less the total sale amount. OTC exchanges will remain subject to operational standards for preventing, monitoring and responding to unfair trading, and contraventions may be sanctioned under the Financial Investment Services and Capital Markets Act. This approach is intended to facilitate market participation by leveraging Korea’s existing financial services regulatory framework, rather than creating a standalone licensing regime for tokenised securities.
- New Role for Issuer Account Management Entities
Under the new system, qualifying issuers of tokenised securities may be permitted to manage securities accounts for customers in respect of their own issuances. This function was previously reserved for financial companies. The change reflects the FSC’s assessment of the operational stability of distributed ledger systems and the potential efficiency of DLT-based securities-rights management.
The proposed subordinate regulations announced on 1 October 2026 further specify the registration requirements applicable to issuer account management entities. Applicants will be required to have minimum equity capital of KRW4 billion, at least one account-management professional, one internal-control professional and two information-technology professionals, together with the other applicable registration requirements.
- Distributed Ledger Screening and Operational Standards
The Korea Securities Depository has prepared screening criteria for distributed-ledger systems used in the electronic registration of tokenised securities. When securities companies apply to connect to a distributed ledger, the Korea Securities Depository will conduct screening and operational testing against these criteria.
The proposed subordinate regulations announced on 1 October 2026 further specify requirements applicable to distributed ledgers used for electronic registration. Among other things, the distributed ledger must include, in addition to the electronic registration institution, at least two account management entities (which may include issuer account management entities). The proposals also prohibit the payment of direct consideration for the use of a distributed ledger for electronic registration, having regard to the distributed ledger’s function as a public register and the need to mitigate risks such as delays in the determination of securities rights.
In addition to core functionality relating to the issuance and circulation of tokenised securities, the criteria address information-technology and cybersecurity standards and contingency planning for system errors or malfunctions, including business-continuity arrangements. Securities companies will be expected to maintain existing levels of operational stability when incorporating distributed-ledger technology into their systems.
- Looking Ahead
The FSC’s roadmap unveiled in September 2026 has already been followed by a further implementation step. On 1 October 2026, the FSC announced proposed amendments to subordinate regulations under the Financial Investment Services and Capital Markets Act and the Electronic Registration Act to facilitate the introduction of tokenised securities from 4 February 2027. The proposed amendments are subject to a legislative notice and public consultation period running from 2 October 2026 to 11 November 2026.
The regulatory proposals provide additional detail on matters including the scope of securities eligible for tokenisation, requirements applicable to distributed-ledger infrastructure, registration requirements for issuer account management entities, and the establishment of an OTC exchange licensing category for debt securities and investment limits applicable to retail investors. Together with the September roadmap, these developments provide greater clarity regarding the practical implementation of Korea’s tokenised-securities regime and demonstrate continued regulatory momentum towards the digitalisation of securities issuance and circulation.
Following the consultation period, the proposed amendments are expected to undergo further regulatory and governmental procedures, including FSC approval and review by the Ministry of Government Legislation, before taking effect alongside the amended legislation on 4 February 2027.
Financial institutions, issuers, asset managers and fintech businesses considering tokenisation projects involving Korea should continue to monitor development during and following the legislative notice and consultation process as well as further developments concerning stablecoins, OTC trading platforms and technical standards for distributed-ledger infrastructure. With the first phase scheduled to commence on 4 February 2027, market participants are expected to begin preparing operational, technology and compliance frameworks well in advance of implementation.
Please contact our Partner Rodney Teoh for any enquiries or further information.
This news update is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.