South Korea’s FSC Unveils Three-Stage STO Roadmap for Stocks, Bonds, and Funds

STOs expand in Korea

South Korea’s Financial Services Commission (FSC) unveiled a three-stage plan to expand security token offerings (STOs) beyond fractional investment products to conventional securities including stocks, bonds, and funds, with investor safeguards and disclosure rules.

The FSC said it released the "policy direction for security token offerings (STOs)" at the third meeting of a public-private joint STO council on Nov. 4, with Vice Chair Kwon Dae-young presenting the roadmap.

The authorities said the related laws would allow not only fractional investments in new and nonstandard securities such as real estate, artworks, and music rights, but also existing standard securities such as stocks, bonds, and funds to be issued as STOs.

The roadmap is built around distributed ledger technology, with the FSC stating that "STOs are issued in digital form based on a distributed ledger" and that brokerages and the Korea Securities Depository would build infrastructure together.

The first stage is set for February next year, when the related law takes effect, and the plan includes tokenization of private placement securities exclusively for institutional investors, with unlisted stocks expected to be tokenized through a trust method.

Reporting for this sectionChosunbiz

Roadmap timeline and limits

The FSC policy direction, disclosed at the third meeting held on the 4th at the Korea Securities Depository in Seoul’s Yeouido district, centers on a three-stage roadmap for tokenized securities issuance infrastructure. In the first stage, when the tokenized securities law takes effect in February, the plan allows tokenization of private money market funds and bonds for institutional investors only, while fractional investment products become eligible for tokenization from the first stage. The second stage calls for expanding and restructuring the infrastructure to the level technically possible, including tokenizing publicly offered securities, while the third stage aims to implement on-chain payments by linking stablecoins and other means of payment.

The policy direction also set investor protection measures, including per-person subscription limits in public offerings, and a standard example of "30 million won or 5% of the issue amount, whichever is smaller". For retail investors using over-the-counter exchanges, the plan includes an annual net purchase ceiling of 100 million won per over-the-counter exchange, with fraudulent trading subject to sanctions under the Capital Markets Act.

Reporting for this sectionSeoul Economic Daily

Stablecoins and compliance

South Korea’s roadmap also addresses how tokenized issuance and payments would connect, with the third stage targeting on-chain settlement by linking payment instruments such as stablecoins, while noting that this requires discussion of the second round of virtual asset legislation. The FSC said it would not create a separate licensing regime for tokenized securities, and that firms already holding financial investment business licenses would be able to handle tokenized securities within the scope of those licenses. For debt securities, the policy includes creating an additional licensing category for over-the-counter exchanges in preparation for expansion of the tokenized securities ecosystem.

The plan further permits conditional pooling of underlying assets for fractional investment products, which had been banned since December 2023, as long as conditions are met such as the same type, clear pooling criteria and purpose, and a prohibition on including nonperforming assets. In its framing of the broader goal, the FSC Vice Chairman Kwon Dae-young said the regulator would connect the entire value chain of the capital market — issuance, trading, clearing, settlement, exercise of rights and underlying assets — "from the perspective of a single digital capital market".

Reporting for this sectionSeoul Economic Daily