From 'Critical Issue' to 'Opportunity'... Will the 6000 Trillion Won Token Securities Market Open?

Recently, as the National Assembly promised to introduce a token securities (ST) related law, attention is once again focused on the token securities market, which has been reduced to a 'brain' for companies due to legislative delays. It is argued that in order to secure competitiveness in the token securities market, which is expected to grow to 600 trillion won in 6 years, swift legislation and institutional improvement of the Capital Market Act and Trust Business Act are necessary.





According to the industry on the 13th, expectations are rising for securities companies and blockchain companies preparing for token securities business. A Kiwoom Securities official said, “The token securities bill (Capital Market Act and Electronic Securities Act amendment) proposed in the 21st National Assembly was scrapped, but since the ruling and opposition parties have recently proposed it again, there are expectations that it will be institutionalized.” A Parameter official said, “The industry as a whole is welcoming the advancement of the bill.”

Representatives Kim Jae-seop of the People Power Party and Min Byeong-deok of the Democratic Party of Korea declared at the ‘Token Securities Market Activation Seminar’ held at the National Assembly Members’ Hall in Yeouido, Seoul, early this month that they would quickly propose a bill related to token securities. This is why there are expectations that the token securities market will open this year, as the ruling and opposition parties have joined forces.

Token securities began to receive attention in earnest when the Financial Services Commission announced guidelines in February of last year. This is because various real assets and rights that are difficult to contain in existing electronic securities, such as music copyrights and real estate, can be traded in the form of token securities. In addition, it is advantageous for corporate fund raising by reducing costs through distributed ledgers and smart contracts and securing liquidity through the inflow of small investors. According to Samil Accounting Corporation, the global token securities market size of 30 trillion won is expected to grow to a maximum of 6,000 trillion won by 2030.



As the golden prospects for token securities continue, domestic securities companies and blockchain companies have been preparing various infrastructures since last year. NH Investment & Securities, KB Securities, and Shinhan Investment & Securities formed a ‘Securities Company Consortium’ in September last year and began establishing business and development requirements for joint infrastructure construction. Blockchain technology company Lambda256 has been collaborating with Hanwha Systems and Investment & Securities on the development of a token securities platform and has also carried out related projects with securities companies.

In line with this, the National Assembly also proposed a revision to the Capital Market Act and the Electronic Securities Act in July of last year, which included the definition of distributed ledgers and the establishment of an issuer account management agency. However, when the bill was not passed and scrapped by the general election in March, token securities suddenly became a 'brain'. A securities company official who requested anonymity confided, "The burden of having invested in advance in line with the national policy direction is great," and "Many (small-scale) companies that were preparing for business together have disappeared." He added, "We had several meetings with overseas companies (interested in the Korean market), but all they conveyed was, 'There's nothing we can do right now. '"



The industry emphasized that along with the speedy passage of the bill, supplementary measures for the token securities distribution market are also necessary. Lee Jae-won, head of the financial business group at Lambda256, argued that “while innovation has already been achieved through real-world linked assets (RWAs) in the global market, Korea has lagged far behind,” and that “we need to speed up the legislation of bills and enforcement decrees with the continued interest of the government, financial institutions, and investors.” Kim Jong-wan, senior manager of the digital asset TF at Mirae Asset Securities, explained that “distributed ledgers are highly efficient not only for issuing securities but also as a distribution infrastructure,” and “in the long term, distributed ledgers should be introduced to the on-exchange market infrastructure as well as the over-the-counter market.”

There are also opinions that the trust law should be revised to allow for the introduction of various products. The domestic trust law stipulates that trusts are virtually impossible except for real estate, aircraft, ships, and intellectual property rights. According to Samil Accounting Corporation, non-monetary trust beneficiary securities such as real estate piece investments can be issued with underlying assets other than real estate according to the Financial Services Commission's 'Trust Business Innovation Plan' in 2022, but there is no precedent yet. Currently, issuance and distribution are possible through the designation of a financial regulatory sandbox, but many say that it takes a long time to get approval for the sandbox, so there is little practical benefit in investing the money. A Kiwoom Securities official said, "Since the announcement of the innovation plan, the amendment to the Trust Business Act has not been proposed yet," and "If the issuance of trust beneficiary securities for non-monetary assets is permitted, it will help revitalize the token securities market." An NH Investment & Securities official added, "The activation of new securities markets such as trust beneficiary securities and investment contract securities determines the success or failure of the market," and "It should be possible to issue securities and raise funds based on various assets under the system."

Reporter Jaeheon Choi

chsn12@decenter.kr