South Korea Establishes Legal Framework for Digital Securities Issuance and Trading through Two Specialized STO Laws

On January 15, after nearly three years of legislative preparation, the National Assembly of South Korea officially passed two key amendments: the Capital Markets Act and the Electronic Securities Act. This move marks South Korea's establishment of clear compliance guidelines and regulatory basis for Security Token Offerings (STO).

National Power Party lawmaker Kim Sang-hoon explained that the core content of these amendments includes allowing token securities to circulate in over-the-counter markets and restructuring the issuance and circulation system of token securities.

Voting results showed that the amendment to the Capital Markets Act was approved with 210 votes in favor and 1 abstention; the amendment to the Electronic Securities Act was approved with 212 votes in favor and 2 abstentions. Currently, these two laws only need to complete the State Council review and promulgation procedures before they can officially take effect.

The legislative process can be traced back to February 2023, when the Financial Services Commission of South Korea first announced guidelines for STO. The relevant bills, after being shelved in the previous National Assembly, were revived and finally approved in this session.

The core content of the bill introduces the legal concept of "distributed ledger," allowing qualified issuers to directly issue token securities and register, record, and manage them electronically.

At the same time, the bill also permits the distribution of token securities in over-the-counter trading markets and formally includes non-typical securities such as investment contracts under the regulation of the Capital Markets Act.

Regarding the effective date, both laws adopt a phased implementation mechanism. Most provisions of the Capital Markets Act will take effect immediately upon promulgation; however, guidelines related to investment advice will come into effect after six months, and regulations on over-the-counter trading will need to wait one year. The amendment to the Electronic Securities Act will only take effect one year after promulgation.

Overall, the core significance of these two laws is to bring blockchain finance out of the "gray area" into a regulated legal framework, aiming to define clear rules for financial innovation and promote healthy industry development within a secure framework.

#韩国 #STO