South Korea Releases Guidelines on Security Tokens

South Korea’s Financial Services Commission (FSC) has published guidelines that specifies which types of digital assets will be considered as securities in the country, the regulator said in a press release on 6 February.

According to the announcement, digital assets will be treated as securities if they have the same characteristics laid out in the country’s Capital Markets Act, which describes securities as financial investments where investors are not required to make additional payments. The FSC noted that his could include tokens that provide profit to the investors, give stake in business operations, or provides rights to dividends or residual assets.

The financial regulator also clarified that stablecoins will likely not fall under the definition of securities, as they are tokens pegged to the value of other currencies and are used for payments and as a medium of exchange. Other assets that will likely not be considered security tokens will be those that do not have an issuer and do not “fulfill the obligations commensurate with the investor’s rights”.

Digital Asset Service Providers, such as token issuers and crypto exchanges, will be responsible for evaluating which digital asset has the characteristics of a security, with each evaluation being done on a case-by-case basis. Crypto assets that fit the description of security tokens will be regulated under the country’s Capital Markets Law, while does that are not qualified as securities will be governed by other upcoming regulations.

These new guidelines are only part of South Korea’s plans to create a comprehensive regulatory environment for the blockchain and crypto sectors. Last year, lawmakers in the country started working on the Digital Asset Basic Act (DABA) bill — a legal framework for regulating the crypto industry in South Korea — and are currently considering 17 separate crypto-related legislative frameworks.