South Korea to let stocks, bonds and funds go onchain

South Korea has proposed rules that would bring stocks, bonds and funds into its token securities framework while limiting retail investors to 100 million won in annual net purchases on each approved over-the-counter platform.

The Financial Services Commission announced the regulatory framework as the country prepares for amendments to the Electronic Securities Act and Capital Markets Act to take effect on Feb. 4, 2027. The latest subordinate-rule proposal moves the system closer to implementation by setting the securities that can be tokenized, requirements for issuers and rules for OTC trading.

Under the proposal, traditional securities including equities, debt securities and investment funds can fall within the legal tokenization framework. Earlier rules and pilots had focused more heavily on fractional investment products such as non-monetary trust beneficiary certificates and investment contract securities.

South Korea brings regular securities into token rules

The FSC’s framework treats a token security as a securities format built on a distributed ledger, not as a separate class of crypto asset. Stocks, corporate bonds, fund interests and other regulated securities therefore remain subject to existing capital-market rules when issued in tokenized form.

The regulator has made clear, however, that the full range of securities will not move onto blockchain infrastructure at once. Its first implementation stage, beginning when the amended laws take effect in February, focuses on privately placed money-market funds and bonds for institutional investors, trust-based tokenization of unlisted shares, and publicly offered fractional investment securities.

Publicly offered traditional securities are planned for a later stage after authorities assess the first phase. The FSC has not fixed a date for that expansion.

In its final planned stage, South Korea intends to connect tokenized securities infrastructure with onchain payment systems, potentially including stablecoins. The timing depends partly on the performance of the earlier phases, technological development and unfinished domestic stablecoin legislation.

The structure builds on South Korea’s three-stage tokenization roadmap, which the FSC unveiled in September after months of discussions with financial companies, the Korea Securities Depository and technology providers.

Retail investors face a 100 million won trading cap

The proposed Capital Markets Act rules would cap ordinary investors at 100 million won, roughly $73,700, in annual net purchases on each token securities OTC platform. The limit applies on a platform-by-platform basis and measures net purchases during the year.

The FSC had already identified the 100 million won ceiling in its September policy roadmap as part of investor-protection rules for tokenized securities trading.

New OTC authorization categories will cover debt securities alongside unlisted shares and non-monetary trust beneficiary certificates. Approved venues will remain subject to surveillance requirements covering unfair trading and other market conduct.

The regulator said existing OTC exchanges must maintain systems to prevent, detect and respond to unfair trading. Violations can trigger measures available under South Korea’s Capital Markets Act, including financial penalties, account restrictions and other sanctions.

For fractional investment products, separate safeguards remain in place because their structures and underlying assets can differ from conventional stocks or bonds.

Issuers can manage token accounts under new conditions

Another part of the framework would let qualifying non-financial issuers manage accounts for securities they issue, a function traditionally handled by financial companies.

To register as an issuer account management institution, a company must hold at least 4 billion won in equity capital. The FSC requires one account-management specialist, one internal-control specialist and two information-technology specialists, alongside systems meeting cybersecurity and operational standards.

The regulator designed the structure so an eligible issuer can manage ownership records for its own tokenized securities without relying on a securities firm for every account-management function. Issuers that do not meet the requirements can still issue token securities through qualified financial intermediaries.

Distributed ledgers used for regulated securities must connect with the Korea Securities Depository’s infrastructure. The FSC has instructed the KSD to review participating networks against technical standards covering ledger participants, consensus systems, record preservation, system failures and business continuity.

South Korea does not plan to replace its entire existing electronic securities system when the framework begins. The first stage will use a hybrid approach, particularly for unlisted shares, where some shareholder rights continue to be managed through existing securities infrastructure while tokenized trust interests can operate through distributed-ledger systems.

Financial firms are preparing before the 2027 launch

Several Korean financial institutions have begun building tokenization products before the law takes effect.

KB Securities signed an agreement with Securitize and the Optimism Foundation in September to develop tokenized funds for institutional investors. The initial plan centers on a money-market fund, with stocks and bonds possible later as regulation and infrastructure develop. KB Securities’ tokenized fund plans

Kakaopay Securities and Dinari disclosed another project on Sept. 29 to study tokenizing Korean-listed shares for eligible overseas investors, potentially including distribution channels in the U.S. No Korean stock has yet been issued through that partnership. Kakaopay’s Korean stock tokenization project

Hanwha Investment & Securities has reportedly completed a tokenized securities platform supporting Avalanche and Hyperledger Besu, while Samsung SDS is building infrastructure for the Korea Securities Depository ahead of the February launch.

Separate work is taking place on settlement. Eugene Investment & Securities and BEATOZ recently agreed to test stablecoins for token securities subscriptions, examining whether subscription, payment and settlement can operate through one blockchain-based process.Eugene Investment’s stablecoin settlement test

Public comments run through November 11

The FSC’s latest subordinate-rule proposal enters a public consultation period from Oct. 2 through Nov. 11.

After comments are reviewed, the measures must proceed through the remaining South Korean regulatory process, including FSC approval, review by the Ministry of Government Legislation and consideration through the vice ministers’ and Cabinet meeting process before implementation.

The amended Electronic Securities Act and Capital Markets Act are scheduled to take effect on Feb. 4, 2027. The FSC and Korea Securities Depository are working with securities firms on the infrastructure required for the first tokenization stage before that date.