South Korea Approves Tokenized Securities in Major Win for Digital Assets

South Korea has legislatively embraced blockchain securities, which are part of their financial ecosystem. The country is among the nations that are at the forefront of investing in tokenization.

South Korea Parliament Lifts the Ban on Tokenized Securities

The lawmakers have supported amendments that have provided a legal basis for the issuance and trading of tokenized securities. The National Assembly in the country has approved amendments to the Capital Market Act and also to the Electronic Securities Act during a plenary meeting on Thursday, according to the government.

The new laws recognize the use of blockchain securities, issued with the aid of distributed ledger technology. The changes in the Electronic Securities Act make it lawful for eligible issuers of securities to use digital securities.

An amendment to the Capital Markets Act allows the trading of such assets using brokerages and financial intermediaries in the form of securities for an investment contract.

South Korea officials think that the framework regarding tokenization is intended to include blockchain technology in the existing market systems rather than replacing them.

According to the FSC, with the adopted framework, there would be the possibility of managing accounts through the help of a ledger. This increases the usability of smart contracts during the issuance or settlement of securities.

“We expect token securities to enable distributed ledger-based securities account management and greater utilization of smart contracts,” the FSC said. “We also anticipate more active use of smart contracts in blockchain-based securities infrastructure.”

After the parliament’s approval of the bill, the bill shall next be submitted to the State Council prior to the presidential promulgation. That’s expected to be a seamless process. The said law shall become effective on January 2027.

This adoption comes after another significant regulatory turn. This comes exactly after the South Korea’s FSC confirmed that they have finalized regulations that would allow corporate entities and institutional investors the ability to trade digital assets. This indicated almost nine years of banned corporate participation in digital assets.

Global Momentum Builds Around Tokenization

This follows the increasing interest worldwide in the concept of asset tokenization. U.S. regulators offered guidance last month to ease regulatory hurdles to encourage institutional experiments in the market.

Large financial organizations are already making the best of this momentum. For example, JPMorgan has just launched a tokenized money market fund based on the Ethereum blockchain.

Forecasts of markets are also anticipating rapid growth.  An outlook from Boston Consulting Group had estimated that South Korea’s tokenized securities market alone could reach around $249 billion by the end of the decade. Standard Chartered also has estimated that the global tokenization market could grow to $2 trillion by 2028.