SOUTH KOREA Law and Practice Contributed by: Jongbaek Park, Seungil Hong, Seyeong Im and Eric Jeong, Bae, Kim & Lee LLC
technology, while the existing capital markets regula - tions governing the issuance, distribution and investor protection of securities continue to apply in full. In the payments and settlements business sector, electronic payment service providers and fintech companies are reviewing blockchain-based remit - tance and payment structures; however, these efforts are primarily focused on improving internal settlement efficiency and automating transaction traceability. Where coins or tokens are used directly as a means of payment, there is a high likelihood of conflict with the EFTA, foreign exchange regulations and anti-money laundering requirements. As a result, in practice, the prevailing approach is to maintain structures similar to existing payment methods while utilising blockchain technology in the backend. 10.2 Local Regulators’ Approach to Blockchain Regulatory authorities in Korea are encouraging inno - vation through the utilisation of blockchain technolo - gy. The Korea Internet & Security Agency (the “KISA”) specifically, under the guidance of the Ministry of Science and ICT, is looking to promote the enact - ment of a draft Blockchain Basic Act to expand the adoption of blockchain and support the development of the industry in the country. As part of this initia - tive, it is conducting research on blockchain-related technologies, including distributed ledger technology, evaluation standards for decentralised identifiers and providing legal force to smart contracts, and preparing a bill to promote blockchain technology and related industry. Meanwhile, to issue security tokens in Korea, amend - ments to the FSCMA and the Electronic Securities Act are needed. Amendments to both Acts have recently been passed with the goal of institutionalising the STO and fractional investment markets, and are scheduled to take effect in January 2027. However, discussions regarding STOs in Korea are currently centred primar - ily on investment contract securities and beneficiary certificates issued by trust companies. With respect to the tokenisation of traditional securities such as shares or bonds, supervisory authorities are taking a notably cautious approach.
Investment contract securities are considered suitable for the initial stage of STO implementation because the content of rights can be structured with greater contractual flexibility, and blockchain-based experi - mentation can be conducted without requiring signifi - cant changes to existing securities market infrastruc - ture. By contrast, shares and bonds already operate under a well-established electronic securities system encompassing issuance, custody, settlement, exer - cise of rights, and disclosure. As a result, transition - ing these instruments to a blockchain-based structure raises substantial concerns regarding market stability and investor protection. For these reasons, supervi - sory authorities are understood to favour a gradual approach – introducing STOs first in relation to invest - ment contract securities and beneficiary certificates issued by trust companies, and only thereafter con - sidering whether to expand STOs to shares or bonds based on market developments and regulatory expe - rience. In addition, several blockchain-based services are exempt from specific regulations through the financial regulatory sandbox programme. However, the financial regulatory authorities distin - guish between the blockchain technology and vir - tual assets, and are taking a reserved and restrictive approach to the virtual asset industry. 10.3 Classification of Blockchain Assets The VAUPA and the AML Act define virtual assets as electronic certificates that have an economic value and can be traded or transferred electronically (except for electronic currency and electronic prepayment means, etc), and blockchain assets that satisfy these requirements will be classified as virtual assets. There are no other financial laws or regulations that specifically regulate blockchain assets. However, depending on its specific nature, a blockchain asset may be classified as a financial instrument and be regulated under the existing legal framework. For example, any blockchain asset that satisfies the definition of “securities” under the FSCMA may be classified as a security and the regulations applicable to a security or any blockchain asset will apply. The
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