in January 2027, the Token Securities Act will go into effect, allowing blockchain-based securities to be recognized as legal financial investment products. the STO market is expected to open up in earnest, allowing people to invest in high-value assets such as buildings, artwork, and music rights in pieces.
table of Contents
- what are tokenized securities?
- key takeaways from the Token Securities Act
- strict separation of issuance and distribution
- investment timeline and market outlook for tokenized securities
- sTO Preparation Status of Securities Firms
- frequently Asked Questions
what are token securities?
a token security is a digital security that takes an expensive asset, such as a multibillion-won building in Gangnam, a painting by a famous artist, or the royalties from a popular singer's music, and breaks it down into small pieces so that it can be easily bought and sold like a stock.
STO stands for Security Token Offering, and in a nutshell, it's the use of blockchain technology to issue digital tokens for ownership of real-world assets.
until now, STOs were only available as pilot investments in a regulatory sandbox, but with the amendments to the Capital Market Act and the Electronic Securities Act, STOs are now recognized as full-fledged financial investment products, the same as stocks and bonds.
key takeaways from the implementation of the Token Securities Act
the biggest change in the law is the recognition of blockchain technology within the framework of the law.
previously, when a stock was purchased, it had to be recorded on the central server of a depository to be legally recognized as a property right. With the amendment to the E-Securities Act, tokens recorded on a distributed ledger are now recognized as authentic securities that prove property rights.
this change makes the following differences
first, any eligible business can raise funds by issuing their own token securities. Second, even small and medium-sized enterprises or small businesses that have had difficulty obtaining bank loans can securitize their ideas or assets to secure business funding. third, investors can easily buy and sell token securities in the OTC market, just like trading stocks.
even investment contract securities, such as artwork or Korean beef, can be freely traded through securities firms.
strict separation of issuance and distribution
the Token Securities Act strictly separates issuance from distribution. to use a movie industry analogy, it's like the legal separation between the production companies that make movies and the theaters that show them.
this separation is necessary for a reason. if a company issues tokenized securities and also operates an exchange, it risks manipulating the market to drive up the price of its securities.
therefore, token issuers are not allowed to operate a secondary market. Market operations are done only through OTC brokers licensed by financial authorities.
tokenized securities investment timeline and market outlook
the official enforcement date is January 2027. this is because a preparation period is required to build the system after the bill is promulgated.
the financial authorities plan to form a token securities council with related organizations such as the Financial Supervisory Service and the Korea Securities Depository and Settlement Service to refine the detailed rules.
The outlook for the STO market is also bright. by 2030, the domestic token security market is expected to reach KRW 367 trillion. this is equivalent to 14.5 percent of South Korea's GDP.
how securities firms are preparing for STOs
major securities firms are already engaged in joint operations to enter the STO market.
mirae Asset Securities has formed the Next Finance Initiative with Hana Financial Group and SK Telecom, and has completed development of its own tokenized securities mainnet.
shinhan Investment & Securities has formed a council called Pulse with SK Securities and LS Securities to prepare an all-in-one service that handles token securities from issuance to distribution.
Large securities firms such as NH Investment & Securities and KB Securities are also ready to take off in collaboration with their respective partners.
frequently Asked Questions
Q1. What is the difference between token securities and crypto assets?
A1. Token securities are legalized financial investment products issued based on real assets. unlike crypto assets like Bitcoin or Ethereum, they are regulated by capital markets laws and have investor protections.
Q2. When will I be able to invest in token securities?
A2. The Token Securities Act will be officially enforced in January 2027. Before then, financial authorities and related organizations will go through a preparatory period to establish detailed rules and build systems.
Q3. Where can I trade token securities?
A3. You can trade through OTC brokers licensed by financial authorities. currently, major securities firms are preparing trading platforms in cooperation with telecommunications and fintech companies.
Q4. Can I invest with small amounts?
A4. The essence of tokenized securities is fragmented investments. even tens of billions of won worth of buildings or expensive artworks are issued in small units, so it is possible to invest even in small amounts.
Q5. What are the risks of investing in token securities?
A5. Token securities are also financial investment products with the possibility of principal loss. investment losses may occur depending on the value fluctuation of the underlying asset, so it is necessary to review sufficiently before investing.
conclusion
the implementation of the Token Securities Act is a historic change that will open a new investment market worth KRW 367 trillion. before the law is fully implemented in January 2027, it's important to keep track of the STO market from now on.
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