South Korea Regulates Digital Assets as Security Tokens
• South Korea established guidance that specifies which types of digital assets will be considered and regulated as securities in the country.
• Digital assets that fit the characteristics laid out in the country’s Capital Markets Act will be treated as securities.
• Token issuers and brokers like crypto exchanges will evaluate which crypto will be classified as securities based on regulations.
South Korean regulator provides guidance on security tokens
The Financial Services Commission (FSC) of South Korea has provided guidance that specifies which types of digital assets will be considered and regulated as securities in the country. According to the FSC, this may include tokens that provide a stake in business operations, gives holders rights to dividends or residual assets, or provide profit to the investors. Cryptocurrencies that fit the descriptions of security tokens will be regulated under the country’s Capital Markets Law.
Characteristics of Security Tokens
The law considers securities as financial investments where investors are not required to make additional payments after their original investment. Digital assets that fit these characteristics laid out in the country’s Capital Markets Act will be treated as securities. Examples of such digital assets include tokens that provide a stake in business operations, give holders rights to dividends or residual assets, or provide profit to investors.
Regulating Security Tokens
Token issuers and brokers like crypto exchanges are mandated by law to evaluate which cryptos should be classified as securities based on applicable regulations. The evaluation must take place on a case-by-case basis for each cryptocurrency asset being evaluated. Additionally, digital assets that do not fit into any of these criteria for security tokens are subject to other upcoming regulatory frameworks from South Korea relating to cryptocurrencies and other digital assets within its jurisdiction.
Legalizing Security Tokens
This new guidance is part of preparations for the legalization, issuing and distribution of security tokens within South Korea’s jurisdiction so long as they meet certain criteria outlined by its respective regulations governing such activities within its borders. It is important for token issuers and brokers alike familiarize themselves with these laws so they can ensure compliance when it comes time for them to issue their own cryptocurrency-based security token offerings (STOs).
In conclusion, South Korea has provided guidance on what constitutes a security token according its Capital Market Act while also providing examples of what could potentially qualify as one under this new framework. As well, they have clarified how token issuers and brokers should go about evaluating which cryptos should fall into this category when it comes time for them issue their own STOs within South Korean jurisdiction