• South Korea’s Financial Services Commission (FSC) has issued a set of guidelines outlining which types of digital assets will be considered and regulated as securities in the country.
• The FSC will also permit security token offerings (STOs) through the amendment of its Electronic Securities Act.
• Cryptocurrencies that meet the definition of security tokens will be governed by the Capital Markets Law, while digital assets that do not meet the definition of securities will be subject to new regulations.
South Korea’s Financial Regulatory Guidelines for Digital Assets
Definition of Securities
The Financial Services Commission (FSC) of South Korea has issued a set of guidelines outlining which types of digital assets will be considered and regulated as securities in the country. It emphasized that digital assets that meet the requirements outlined in the country’s Capital Markets Act will be treated as securities. Securities are defined by law as financial investments in which investors are not required to make additional payments after their initial investment.
Examples
The FSC also gave examples of digital assets that are likely to be classified as securities, such as tokens that give holders a stake in business operations, rights to dividends or residual assets, or profit to investors. Bitcoin and Ethereum (ETH), crypto tokens with no centralized issuer, will not be considered securities.
Security Token Offerings Permitted
By amending its Electronic Securities Act, the FSC will also permit security token offerings (STOs). Cryptocurrencies that meet the definition of security tokens will be governed by the Capital Markets Law of the country. Meanwhile, digital assets that do not meet the definition of securities will be subject to new regulations. According to the FSC, token issuers and brokers such as crypto exchanges will use these regulations to determine which crypto is classified as a security. The evaluation process for this classification is done on a case-by-case basis according to FSC criteria.
Tracking System Implemented
South Korea has been an active participant in cryptocurrency for quite some time now and recently announced plans for establishing a decentralized digital commodities exchange in Busan city with government officials saying it should go live this year.. On 29 January 2021 ,the South Korean government announced implementation tracking system to combat money laundering and recover funds associated with criminal activities .
Global Crypto Center
The financial regulator also stated that these new guidance is part South Korea’s preparation for legalization ,issuance ,and distribution Security Tokens . This would make South korea one global crypto center leading technology market globally .