Following fresh recommendations released on Monday, South Korean securities companies and token issuers now have some clarification about the definition of security tokens.
The definition of security tokens by the Financial Services Commission of South Korea, which aligns the nation with other legal systems in the larger Asia area, is tokens that are digitalized utilizing distributed ledger technology.
According to this instruction, businesses must first regulate themselves.
According to Angela Ang, senior policy adviser at blockchain intelligence company TRM Labs and a former regulator at the Monetary Authority of Singapore, South Korea’s approach of tying the scope of security token offerings back to the definition of securities is generally in line with that of other regulators, including Singapore and Hong Kong.
In South Korea’s financial markets, the regulatory clarity “should foster digital asset innovation,” according to Ang.
Traditional securities firms had been wary of entering the market prior to the guidance’s release.
According to Mooni Kim, a foreign attorney with the legal firm Kim & Chang, the fundamental position that the securities legislation may apply to tokens was comparable to that of the United States.
“How?” was always the next query.
One such organisation is Shinhan Investment and Securities, one of the largest securities firms in the country. It has urged other businesses to join an alliance to inform investors about the benefits of token securities and establish standards and best practises for issuance and trading.
He doesn’t think it will have a significant impact on their business, said a crypto exchange executive who spoke on the condition of anonymity to protect his relationship with regional regulators. Securities firms appear to be hopeful about it. He claimed that he did not interpret the recommendations as an indication that the authorities were supporting the cryptocurrency sector.
The securities market already has securities, he declared. Maybe the asset categories should be accurately defined first.
The outcome of the US Securities and Exchange Commission’s legal action against Ripple, he claimed, was what he was waiting on. He does not want South Korea to adopt regulations earlier than the rest of the globe.
This official said of the guidance that “it’s great for investors” since “the Korea Securities Depository will monitor the overall quantity of issued assets and keep an eye on token issuers.”
Major cryptocurrency exchanges delisted Wemade last year after it was claimed that the South Korean gaming company misled investors about the quantity of Wemix tokens it had issued.
Self-assessment
Legislators will then modify important current laws to include security tokens. In the first part of this year, the National Assembly will be presented with regulatory proposals for changes to the Capital Markets Act and the Electronic Securities Act.
South Korea’s regulators have worked to strengthen consumer protections since the UST stablecoin of the Terra system crashed last year. They have also developed a regulatory framework for the cryptocurrency industry, which will eventually take the form of the Digital Asset Basic Act.
However, by self-regulating, businesses will be taking the first step. The guidelines mandate that token issuers, brokers, and other interested parties evaluate whether or not a token is a security.
According to Kim, cryptocurrency participants will need to examine their own classification and related tokens to see whether they need to apply to be regulated under the securities regime.
According on the licences needed and the company’s business strategy, the process of getting licences for companies without securities-related licences can take one to two years.
When corporations and regulators agree on what constitutes a security and what does not, Ang anticipates some growing pains.
Although, according to Ang, the FSC presents detailed material to help explain that choice and will presumably examine each determination on a case-by-case basis.
