Security tokens in South Korea could operate under a new market as the country’s leading financial regulators deliberate on the matter. The Financial Services Commission (FSC), the Financial Supervisory Service, Korea Exchange, and the Capital Market Research Institute produced a joint report hinting at regulators’ new strategy.
According to the report, the FSC will prepare the guidelines to regulate security tokens before the end of 2022. To ensure uniformity and compliance, the FSC will establish a Security Token Discipline System, drawing the regulations from existing laws like the Capital Market Act and the Electronic Securities Act.
The agencies agree that the current body of laws falls short of the requirement to regulate a fast-changing digital securities market. Hence, separate legislation must be created to “support the sound development of the market and industry.”
Under the incoming regime, the Korea Exchange will operate the digital securities market while the Korea Securities Depository will handle the registration and listing of new tokens. The agencies say that there will be extensive tests of the proposed plans before completing the guidelines to ensure the target initiative’s smooth running.
“In addition, even before the legal foundation is complete, we will first create a pilot market through the financial regulation sandbox while taking the results into consideration to promote formal institutionalization,” read the FSC’s statement.
A breath of fresh air for South Korea’s digital asset industry
South Korea’s lead in digital assets has been waning over the last few years as its neighbors experience a spike in use and adoption. Reports of stringent incoming taxation have dampened the enthusiasm of both old and new investors in the country after the adoption boom in 2020.
Things appear to be turning around for the nation’s virtual currency ecosystem following the election of a believer in digital assets and distributed ledger technologies (DLT). Since the election of President Yoon Suk-yeol, the country’s Parliament has been engaging in drafting new legislation for the budding industry. South Korean newspaper Kukmin reported a leak of a bill called the Digital Asset Basic Act (DABA) that is believed to regulate the entire digital asset ecosystem in the country, introducing a wave of positives for enthusiasts.
In terms of metaverse development, the country has several national projects in that area and is widely thought to be the industry leader globally. Legislators are mulling over the passage of a Metaverse Industry Promotion Act that will offer incentives to companies that move their operations to virtual worlds.
Watch: The BSV Global Blockchain Convention panel, Law & Order: Regulatory Compliance for Blockchain & Digital Assets
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