South Korea’s FSC Issues Guidelines for Regulating Security Tokens

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Key takeaways:

  • The nation’s Capital Markets Act will govern digital assets that meet the criteria for security tokens.
  • Securities are financial investments in which investors are not obligated to make further payments after their initial contributions.

Guidelines outlining which sorts of digital assets will be treated as securities in the country and managed appropriately were published by South Korea.

Digital assets that satisfy the requirements outlined in the country’s Capital Markets Act will be regarded as securities, according to a press release from the Financial Services Commission (FSC).

The law regards securities as financial investments in which investors are not obligated to make extra payments after their first investment. The FSC also gave examples of digital assets that it believes will most likely be categorized as securities. According to the FSC, these could be tokens that grant owners a stake in business operations, rights to dividends or remaining property, or monetary rewards for investors.

The nation’s Capital Markets Law will govern cryptocurrencies that satisfy the definitions of security tokens. Other impending laws, meantime, will control digital assets that don’t match the definition of securities.

The FSC claims that brokers, such as cryptocurrency exchanges and token issuers, will choose which cryptocurrencies would be categorized as securities based on the rules. The agency also noted that each situation would be evaluated individually. The financial authority also mentioned that the new guidelines are a part of the nation’s plans to legalize, issue, and disseminate security tokens. FSC declared:

“On the other hand, digital assets corresponding to securities must be issued and distributed in compliance with all securities regulations under the Capital Markets Act,”

According to the guidelines, the planned regulations foster innovation while preserving consumer protection.

“During the first half of 2023, we will promote institutionalization by submitting amendments to the Electronic Securities Act and Capital Markets Act to the National Assembly,”

The cryptocurrency ecosystem has seen active participation from South Korea. The city of Busan announced plans to create a decentralized digital commodities exchange on January 19. Government representatives announced that the platform would start running this year.

In addition, the nation’s Ministry of Justice intends to set up a crypto-tracking system. The South Korean government said on January 29 that it would implement a tracking system to thwart attempts at money laundering and retrieve funds associated with illegal activity.

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