South Korea Readies for Crypto Era with Securities Rules

1. South Korea takes the lead in cryptocurrency legislation.
2. Under the new guidelines, security token issuers must be registered and audited.
3. FSC claims these measures aim to protect investors and prevent illegal activities.

South Korea, known for its technology-forward approach, is taking the lead in the regulation of cryptocurrencies. Recently, the country’s financial watchdog, the Financial Services Commission (FSC), issued guidelines on cryptocurrencies as securities tokens ahead of their planned legalization.

This action is a significant step towards establishing the legitimacy of the cryptocurrency market in South Korea and bringing it in line with traditional financial markets. Further, security tokens and cryptocurrencies that reflect ownership in stocks, bonds, or real estate, are regulated under the FSC’s standards.

Under the new regulations, security token issuers must be registered and undergo regular audits. The tokens must also be traded on approved exchanges, ensuring their transparency and accessibility to all investors. 

According to a Financial Service Commission press release, these measures aim to protect investors and prevent money laundering and other illegal activities.

Additionally, the guideline explains that stablecoins tied to other currencies, like the U.S. dollar, and used for payments or exchange are unlikely to fall under securities. Similarly, digital assets with no issuer and no investor rights duties will also likely fall outside the scope of security tokens.

In contrast, the FSC emphasized that the distribution and issuance of digital assets representing securities must follow all securities requirements outlined in the Capital Markets Act.

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Despite these limitations, Security tokens represent a significant development and might change securities trading and settlement in finance. Security tokens may aid issuers and investors by harnessing blockchain technology to build a more efficient, secure, and accessible capital market.

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