South Korea's financial authorities have set a retail investor limit for investments in token-securities over-the-counter exchanges ahead of the system's launch in February next year. The cap is 10 million won in annual net purchases per exchange. The scope of token-securities issuance will expand from fractional investment securities to conventional securities including stocks, bonds and funds.

The Financial Services Commission said it will issue a legislative notice on revisions to enforcement decrees and related regulations under the Electronic Securities Act and the Capital Markets Act from Oct. 2 to Nov. 11. The revisions detail delegated matters in the amended Electronic Securities Act and Capital Markets Act, which are set to take effect on Feb. 4, 2027.

The retail investor limit for token-securities OTC exchanges will be set at 10 million won in annual net purchases per exchange. Net purchases are calculated by subtracting total sales from total purchases over a year.

The FSC explained it set the limit at a level that does not excessively restrict investor trading while referring to existing cases such as crowdfunding and the regulatory sandbox for fractional investment.

The scope of licensing for OTC exchanges that can trade token securities will also widen. In addition to existing unlisted stocks and beneficiary certificates of non-monetary trusts, authorities will create a new licensing category for OTC exchanges that handle debt securities.

While retail demand for bond trading is not large at present, the move reflects the possibility that the distribution market could expand in the future through bond tokenisation. For investment contract securities, authorities will review whether to create a new OTC exchange licensing category after additional research to secure tradability.

The range of securities that can be issued as token securities will also expand. In addition to fractional investment securities such as beneficiary certificates of non-monetary trusts and investment contract securities, conventional standardised securities including stocks, bonds and funds will be allowed to be issued in token-securities form.

Authorities also detailed registration requirements for an "issuer account management institution," under which a securities issuer can directly manage investor accounts.

The minimum capital will be set at 4 billion won. Issuers must secure at least 1 account-management specialist and at least 1 internal-control specialist, as well as at least 2 IT specialists. Non-financial-company issuers that meet the requirements will be allowed to directly open and manage investor accounts for securities they issue.

Authorities will also set requirements for distributed ledgers that record rights relationships for token securities. In addition to an electronic registration agency, at least 2 account management institutions must participate in the distributed ledger, and an issuer account management institution may also be included among participating institutions.

As the distributed ledger is used as an official ledger to verify rights relationships of securities, the move is intended to ensure record reliability and business continuity in case of disruptions.

Direct payment of consideration to a distributed ledger used for electronic registration will also be prohibited. The aim is to block the possibility that economic rewards from block creation and other activities could affect the finalisation of rights records.

The final standards may change during the legislative notice process. The FSC plans to review opinions that the annual net purchase cap per OTC exchange for retail investors should be higher than 10 million won, as well as industry demands that the minimum capital requirement for issuer account management institutions should be lower than 4 billion won.

Opinions calling for easing technical requirements, including those for distributed ledger participating institutions, will also be discussed during the legislative notice period.

The revisions are expected to take effect from Feb. 4, 2027, after the legislative notice, an FSC resolution, a review by the Ministry of Government Legislation, and deliberations and resolutions at vice-ministerial and Cabinet meetings.