SOUTH KOREA Law and Practice Contributed by: Wooyoung Choi, Suhhee Han, Seonghwan Ju and Matt Younghoon Mok, Lee & Ko
Lee Kang-il Bill This proposal allows the FSC to order suspension of issuance or trading of value-stable digital assets where it is deemed that normal trading cannot be conducted due to circumstances such as the issuer’s insolvency or major system failures affecting the operation of the stablecoin system. 7. Tokenisation and Real-World Assets 7.1 Treatment Previously, there was insufficient institutional infra- structure for the issuance and distribution of tokenised assets, and fractional investment products were only introduced on a limited basis through regulatory sand- boxes and other innovative financial service regimes. However, with the recent amendments to the FSCMA and the ESA, a regulatory framework for real-world assets (RWA) tokenisation has now been established. Accordingly, security tokens are now brought within the existing regulatory perimeter, including the FSC- MA and the ESA. First, since security tokens qualify as securities (finan- cial investment instruments) under the FSCMA, they are subject to the same regulatory regime as other forms of securities. This includes issuance-related regulations such as the obligation to file securities registration statements, prohibitions on unfair trading practices, and business conduct regulations. Under
the amended FSCMA, distribution-related rules appli- cable to securities are also fully extended to invest- ment contract securities, including tokenised securi- ties. In addition, the FSCMA introduces an OTC broker- age system for equity securities and trust beneficiary securities, thereby establishing a legal framework for multilateral OTC trading. In this regard, the financial authorities have maintained the position that issuance and distribution markets should be separated in rela- tion to emerging securities such as fractional invest- ment products. Accordingly, authorisation procedures are currently underway for OTC brokerage platforms dealing with beneficiary interests (ie, fractional invest- ment OTC exchanges). However, it remains under discussion whether such authorisation will extend to tokenised trust beneficiary securities. Meanwhile, the amended ESA provides a legal basis for the use of DLT, thereby recognising the legal effect of securities issued in token form. Previously, full dem- aterialisation using DLT was not permitted, requiring issuance of electronic securities that were strictly matched on a 1:1 basis with tokens. Under the revised framework, electronic securities utilising distributed ledger systems are now recognised. Furthermore, the introduction of an “issuer account management insti- tution” system provides an alternative to centralised electronic registration and custody. The amended ESA is scheduled to take effect on 4 February 2027.
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