Revisions to the Electronic Securities Act and the Capital Markets Act aimed at introducing token securities (STO) and allowing distribution of investment contract securities passed the National Assembly plenary session on Wednesday. This gives a legal foundation for issuing and distributing securities using distributed ledger technology.

The revisions were pursued to grant legal effect to the issuance and distribution of token securities and to establish investor protection measures. The bills were proposed during the 21st National Assembly but were scrapped when the term ended, then reintroduced in the 22nd National Assembly and cleared the National Policy Committee and the Legislation and Judiciary Committee before passing the plenary session on Wednesday.

The revised Electronic Securities Act defines the concept of a distributed ledger and recognises it as a securities account book (electronic registration account book). This allows token securities issuance that records and manages securities information using blockchain technology. Issuers must give advance notice to an electronic registration agency and apply for electronic registration in line with legal procedures and requirements.

The Capital Markets Act revision expands distribution channels for investment contract securities, which had faced restrictions. Previously, trading and brokerage through securities firms were banned because investment contract securities have non-standard characteristics, but the revision allows brokerage by securities firms. This is expected to further activate fractional investing based on various assets such as artworks and Korean cattle.

The Financial Services Commission plans to refine subordinate regulations in line with the law taking effect a year after promulgation, in January 2027 on a provisional basis. It will also launch a token securities consultative body in February so the token securities ecosystem can begin operating as soon as the law takes effect.

The consultative body will include the Financial Services Commission, the Financial Supervisory Service, the Korea Securities Depository and the Korea Financial Investment Association, as well as market participants and academic experts. It will be divided into three subcommittees to design detailed systems covering technology and infrastructure, issuance rules and distribution rules.

An official at the Financial Services Commission said small and medium-sized companies and small business owners will also be able to securitise various projects and raise funds in capital markets. The official said investors are also expected to see improved access to new types of securities such as fractional investment securities and greater transparency of information.