As the implementation of token securities (STO) legislation approaches next year, there are calls for allowing blockchain-based test trading to verify the safety of products offered by securities firms.
At a seminar titled "Transformation of the Digital Asset Market Centered on Institutions" held on November 12 at the National Assembly in Yeouido, Seoul, Kang Byeong-ha, an executive at Meritz Securities, stated, "The digital asset market is transitioning from being exchange and individual-centric to being focused on financial institutions and corporations."
With the revised Capital Markets Act and Electronic Securities Act set to take effect in February, enabling the issuance of token securities, securities firms are preparing to establish internal settlement and clearing infrastructure, as well as fractional investment products.
Kang explained, "The first phase of the digital asset market was characterized by decentralized environments where virtual asset exchanges and individual investors traded Bitcoin and altcoins, leading to liquidity concentration. In contrast, the second phase will see a reorganization of the market, with traditional financial institutions and corporations, such as banks and securities firms, handling token securities, real-world assets (RWA), and stablecoins within a regulated framework." He predicted that ultimately, there would be a 'super platform' (third phase) where fiat currencies, stablecoins, traditional securities, and tokenized securities are traded at a single point.
However, he emphasized that pre-testing is essential for business preparation and securing global competitiveness, noting that even small test trades are currently difficult due to regulatory constraints. He called for the allowance of test-stage blockchain transactions and a practice period to verify product safety before launch.
Kang also expressed concerns about the fragmentation of distributed ledgers (private chains) in South Korea. He warned that if domestic distributed ledgers are designed in a way that is too fragmented or lacks global compatibility, it will be challenging to expand into channels for foreign capital inflow in the long term. He stressed the need for regulatory frameworks that meet global standards to facilitate the seamless entry of foreign capital into Korean stocks and bonds.
He raised investor protection issues related to the tokenization of domestic stocks on unlicensed overseas platforms. He noted that a recent leveraged token product tracking the price of Korean semiconductor stocks was traded on an overseas exchange, and if an unlicensed entity that does not hold the underlying assets (stocks) issues such products, it could lead to a 'token run' where investors are unable to receive compensation in the event of a sharp price increase.
The seminar also featured suggestions from academia and industry regarding the infrastructure conditions necessary for opening the corporate market and attracting institutional funds.
Lee Jong-seop, a professor at Seoul National University, stated, "We must go beyond simply allowing corporate trading to ensure that institutional funds enhance market liquidity quality and contribute to the real economy. This requires the establishment of professional market maker functions, reliable price information infrastructure, payment systems where assets and funds settle simultaneously, and a clear management and supervision framework."
Jung Gu-tae, CEO of Infinite Block, emphasized the need to build a 'trust infrastructure' for the institutional market. He pointed out that 76% of recent major exchange hacking incidents stemmed from inadequate infrastructure operation and control rather than technical flaws. He argued that to facilitate the entry of institutions, a collaborative model combining the trust capabilities of traditional financial firms with the technology of virtual asset operators should be allowed, along with conditional licensing and regulatory sandboxes to expand testing opportunities.
The subsequent panel discussion also highlighted the need for regulatory easing and legal consistency to facilitate the integration of capital markets.
Chairing the discussion, Jeong Yoo-shin, head of the AI Digital Economy and Finance Forum, remarked, "As we merge horizontal distributed ledgers with the vertical traditional financial system, regulations must also evolve to allow for this integration." Cha Sang-jin, a lawyer at Becom Law Office, suggested that to facilitate institutional entry, the unlimited liability of custodians should be reasonably adjusted, and conflicts with existing capital market laws regarding the clearing of digital asset derivatives and stablecoin settlements should be resolved.
Lee Seong-san, head of the Solana Foundation in Korea, noted that the U.S. Securities and Exchange Commission (SEC) recently introduced an 'Innovation Exemption Program,' allowing for the trading of tokenized U.S. listed stocks with actual dividends and voting rights on public blockchains for a limited time over the next five years. He indicated that tokenized trading of actual U.S. listed stocks is expected to begin early next year.
Financial authorities and the National Assembly have expressed their intention to accelerate legislative efforts.
Seo Na-yoon, head of the Virtual Assets Division at the Financial Services Commission, stated, "We are reviewing how to incorporate the roles of market makers, collaboration between financial firms and virtual asset operators, and enhanced security management and accountability into the Digital Asset Basic Act. Once the direction of the bill is established in the Political Affairs Committee, we can actively consider the test trading aspects requested by financial firms."
Representative Choi Eun-seok, who hosted the seminar, acknowledged that while there have been delays in legislative discussions, he continues to communicate with members of the Democratic Party, including Yoo Dong-soo, Min Byeong-deok, and Kim Hyun-jeong. He emphasized the commitment of both parties to establish a comprehensive framework for the Digital Asset Basic Act as quickly as possible to foster a healthy market ecosystem and enhance global competitiveness.
* This article has been translated by AI.
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