South Korean financial regulator to include security tokens into its capital markets rules.
South Korean Financial Services Commission (FSC), an institution that formulates financial policy and regulates financial market activities in Korea, has issued guidelines specifying which digital assets are considered and controlled as securities.
According to the press release shared on February 6th, digital assets will be treated as securities when their characteristics fit aspects noted in South Korea’s Capital Markets Act.
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Based on the new guidelines, securities are financial investments that do not require investors to make several additional payments after making the initial investment.
In particular, the South Korean FSC distinguished several criteria that would suggest that a digital asset is a security. Based on FSC, the tokens are securities if they provide profit to investors, give a stake in certain business operations and give a right to dividends or residual assets.
Therefore, in the press release, FCA noted that digital assets, which are considered to be securities, will be regulated based on the country’s Capital Markets Act. On the other hand, those digital assets that do not fall under the scope of securities will be handled following other upcoming regulations.
Based on the FSC, crypto exchanges and token issuers will determine which digital assets are securities. Moreover, FSC noted:
Whether or not it is a security is determined on a case-by- case basis based on the actual content of the right, comprehensively considering the specific facts and circumstances.
At the end of its press release, the South Korean FSC revealed that the launch of new guidelines is a part of the country’s preparation to legalize security tokens and ensure customer protection. The South Korean financial regulator noted:
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.
South Korean authorities have been actively working on launching the “Virtual Currency Tracking System.” The authorities expect to launch the tool in the first half of 2023.
