South Korean regulator provides guidance on security tokens

South Korea established guidance that specifies which types of digital assets will be considered and regulated as securities in the country.

In a press release, the Financial Services Commission (FSC) highlighted that digital assets that fit the characteristics laid out in the country’s Capital Markets Act will be treated as securities.

This law considers securities as financial investments where investors are not required to make additional payments after their original investments. In addition, the FSC also provided examples of which digital assets will most likely be classified as securities. According to the FSC, this may include tokens that provide a stake in business operations, gives holders rights to dividends or residual assets or provides profit generated by the business to the investors.

Cryptocurrencies that fit the descriptions of security tokens will be regulated under the country’s Capital Markets Law. Meanwhile, digital assets that do not fit the characteristics of securities will be governed by other upcoming regulations.

According to the FSC, token issuers and brokers like crypto exchanges will be tasked with making the evaluations on which crypto will be classified as securities based on the regulations. The regulator also pointed out that the evaluation will be on a case-to-case basis.

The financial regulator also noted that the new guidance is part of preparations for the legalization of the issuing and distributing of security tokens within the country.

Related: Seoul government opens city’s metaverse project to public

South Korea has been actively participating in the crypto ecosystem, with various sectors within the country continuously developing. On Jan. 19, the city of Busan revealed plans to establish a decentralized digital commodities exchange. Government officials noted that the platform is set to begin its operations this year.

Apart from this, the country’s Ministry of Justice also plans to deploy a tracking system for crypto. On Jan. 29, the South Korean government said that it will introduce a tracking system that aims to combat money laundering efforts and recover funds connected to criminal activities.