South Korean Crypto Industry to Implement Self-Regulation Guidelines

The Financial Services Commission (FSC) in South Korea has issued guidance defining security tokens as tokens that are digitized using distributed ledger technology, which brings regulatory clarity for South Korean securities firms and token issuers.

This move aligns South Korea with other jurisdictions in Asia, such as Singapore and Hong Kong, that require firms to regulate themselves in the first instance.

The new regulatory framework is expected to encourage digital asset innovation in South Korea’s capital markets and players in traditional finance are already responding, including Shinhan Investment and Securities.

While there may be growing pains as regulators and businesses work towards agreement on what is and what is not a security, the guidance provides a foundation for a more robust regulatory framework that can help promote the growth of the industry.

Firms that do not hold securities-related licenses will need to go through the process of obtaining licenses, which can take up to two years depending on the licenses and business model.

The FSC will propose amendments to the Capital Markets Act and the Electronic Securities Act, which will be presented to the National Assembly in the first half of 2023.