South Korea's FSC Consultation on Rules for Tokenised Stocks, Bonds and Funds

South Korea’s Financial Services Commission (FSC) has signalled rules that will govern how conventional securities can be issued and circulated in tokenised form, giving issuers, licensed exchanges, custodians and their advisers a window to shape the operational framework before it takes effect. The FSC’s consultation process is designed to allow market participants to comment on the subordinate rules that put flesh on the enabling legislation. Where the proposal sets numeric limits, such as a retail net-purchase cap per licensed platform and a minimum capital requirement for entities that directly manage customer accounts, these are set by the FSC and are subject to the final rules as adopted, with a phased commencement.

For corporate counsel advising on capital markets, funds, custody and digital-asset structuring in Korea, the consultation is both a compliance signal and an opportunity to influence the final text.

Note on dates and figures: specific consultation dates, commencement dates, monetary caps and capital thresholds referenced below reflect figures that have circulated in connection with the FSC’s security token (STO) framework. Readers should verify the exact current figures, scope and timetable directly against the FSC’s official consultation notice and the finalised subordinate rules before relying on them, as these are subject to change through the consultation and legislative process.

Key facts: what the FSC consultation on tokenised securities means in practice

• Consultation window. The FSC publishes its consultation document with a defined comment period (typically several weeks). Confirm the current opening and closing dates against the FSC’s official notice.
• Scope. Tokenised versions of regulated securities: stocks, bonds, investment funds and certain fractional investment products, including non-monetary trust beneficiary certificates.
• Retail cap. A net retail-purchase cap per licensed platform, as set by the FSC in the final rules.
• Issuer capital. A minimum capital requirement for issuers or platforms that directly manage customer accounts, plus dedicated compliance and technology staffing, as set by the FSC.
• Phased rollout. A phased commencement, with an initial phase covering a constrained set of instruments and a later extension to a broader range of publicly offered securities.

Because the FSC consultation builds on a developing statutory base, the detailed operational layer determines who can issue tokenised securities, under what capital and staffing conditions, and how retail participation is constrained.

Background and legal basis

Tokenised securities in South Korea rest on a functional principle: a security that is issued or recorded using distributed ledger technology remains a regulated security. It does not migrate into a separate crypto-asset category simply because the medium of record changes. That principle is what allows the existing securities-law architecture under the Financial Investment Services and Capital Markets Act (FSCMA) and related registration rules, disclosure, investor protection, registration and supervision, to apply to tokenised instruments without rewriting the entire corpus of capital-markets law.

Legislative background, recognising distributed ledgers as securities registries

The framework involves amendments intended to give legal recognition to distributed ledgers as a valid form of securities registration, alongside amendments to the Act on Electronic Registration of Stocks and Bonds (the Electronic Securities Act). This is the pivotal step: without legislative recognition, the legal status of a token recording ownership of a regulated security is uncertain. By permitting distributed ledgers to function as a form of registration within the securities framework, the legislature would create the statutory foundation on which subordinate rules build.

The distinction between primary law and subordinate rules is important: the primary law addresses whether tokenised securities are lawful, while the FSC’s rules address how, by whom and under what controls they may be issued and traded. Readers should confirm the current legislative status, as the enabling amendments have progressed through the National Assembly’s legislative process.

How the Korea Securities Depository remains within the registration system

A recurring concern among market participants has been whether distributed ledger registries would displace the Korea Securities Depository (KSD). The proposals indicate that the KSD continues to sit within the registration system. In other words, the recognition of distributed ledger registration operates alongside, rather than in substitution for, the established central registration infrastructure. The practical effect is that custody, reconciliation and settlement models for tokenised securities must be designed with the KSD’s continuing role in mind, rather than assuming a fully decentralised registry replaces the central depository. This has significant implications for interoperability, which is addressed further below.

Summary: what the consultation proposes

The consultation document sets out the operative provisions that will govern tokenised securities. The structure follows three themes: the types of securities in scope, the functional legal treatment of the tokenised form, and the registration and transfer rules. Understanding each is essential before preparing a comment submission.

Types of securities in scope

The proposal brings a defined set of regulated instruments within the tokenisation framework:

• Tokenised stocks (Korea). Listed and unlisted shares, with unlisted shares accommodated via trust structures in the early phase.
• Tokenised bonds (Korea). Debt securities, with bonds for institutional investors included in the initial phase.
• Tokenised funds (Korea). Investment funds, including certain pooled funds in the early scope.
• Fractional investment certificates (Korea). Publicly offered fractional investment securities and non-monetary trust beneficiary certificates.

The inclusion of fractional investment products is notable because these are precisely the instruments where tokenisation delivers the clearest commercial advantage, enabling retail access to assets that were previously difficult to divide and distribute.

Functional treatment, tokenised form equals regulated security

The consultation confirms the functional approach: a tokenised instrument that represents a regulated security is treated as that security, subject to the same investor-protection and disclosure obligations. This is the single most important interpretive point for corporate counsel, because it means tokenisation does not create a regulatory arbitrage. Issuers cannot escape prospectus, disclosure or suitability requirements by issuing in tokenised form. The regulated character attaches to the economic substance of the instrument, not the technology used to record it.

Registration and transfer rules, distributed ledger as securities registry

Under the proposed rules, a distributed ledger may operate as a form of securities registration for in-scope instruments, recording issuance, ownership and transfer. Transfers effected on the ledger are recognised within the securities framework, provided the registry and the operators meet the operational and governance standards the FSC sets. Because the KSD remains within the registration system, the design question for platforms is how their ledger-based records reconcile with the central depository, a point that will recur in custody and operational-resilience planning. A distributed ledger securities registry in Korea is therefore best understood as an authorised addition to the registration architecture, operating under defined conditions rather than as a free-standing alternative.

Retail cap, capital and organisational requirements

The most commercially consequential elements of the proposal are the quantitative limits and the organisational prerequisites for issuers and platforms. These provisions will determine the viability of business models and the shape of the secondary market.

The retail purchase cap

The proposal contemplates an annual net retail-purchase cap per licensed platform, at a level to be set by the FSC. The concept of “net” is important: where the cap is measured against net purchases, sales within the period offset purchases when calculating the limit. The methodology for this calculation is one of the clearest candidates for comment, because the precise treatment of netting across accounts, across time periods and across multiple platforms materially affects how retail investors and platforms operate. If the cap is expressed per licensed platform, a retail investor active on more than one platform could, on a literal reading, hold a combined exposure exceeding the per-platform limit.

Industry observers expect the aggregation question, whether the cap is monitored platform-by-platform or on a consolidated basis, to feature prominently in consultation responses, as it directly shapes secondary-market liquidity and surveillance obligations. Confirm the exact cap figure against the final FSC rules.

The capital requirement and staffing obligations

Issuers or platforms that directly manage customer accounts face a minimum capital requirement, together with obligations to maintain dedicated compliance and technology staff. The precise capital threshold is set by the FSC and should be verified against the current rules. A capital threshold is a meaningful barrier to entry and signals the FSC’s intent that entities handling customer assets and accounts be adequately capitalised against operational and custody risk. The staffing requirements point to the regulator’s expectation that tokenisation platforms treat technology governance as a core control function, not an outsourced afterthought.

For platforms modelling their launch economics, the interaction between the capital requirement and the retail cap is central: a business constrained by a per-investor net-purchase limit must build a volume model that justifies the capital base and the associated compliance and technology headcount. These are precisely the structural tensions that a well-drafted consultation response can surface, including any transitional or exemption arrangements that would ease the path for early entrants.

Phased commencement and timeline

The consultation adopts a phased approach to commencement, limiting the initial scope before extending the framework across public markets. Counsel should map client readiness against the official timetable, confirming current dates against the FSC’s published notice.

Phase 1, initial scope

Phase 1 covers a deliberately constrained set of instruments, which is expected to include:

• Certain pooled funds within the selected scope.
• Bonds for institutional investors.
• Unlisted shares issued via trust structures.
• Publicly offered fractional investment securities.

The common thread is that Phase 1 concentrates on institutional and selected fractional products, instruments where investor sophistication or the fractional structure make an earlier launch manageable from a supervisory perspective.

Later phase, extension to publicly offered securities

A subsequent phase is expected to extend the framework to a broader range of publicly offered securities, covering stocks, bonds and funds across the public markets and opening fuller retail participation. The timing of the later phase is likely to depend on the FSC’s assessment of how Phase 1 operates, including the performance of custody and reconciliation arrangements and the effectiveness of the retail cap. Market participants planning for retail-facing products should treat the later phase as the horizon for scaled retail distribution, while using Phase 1 to establish the operational and compliance infrastructure.

The immediate date that matters for every participant is the consultation comment deadline. Submissions filed before that date are the mechanism by which the final subordinate rules, and the triggers for the later phase, can be influenced. Confirm the current deadline against the FSC notice.

Market impacts for issuers, exchanges, custodians and investors

The consultation reaches across the market, and each category of participant faces distinct considerations.

Issuers

For issuers, tokenisation changes the mechanics of corporate action, disclosure and record-keeping, but not the substance of their obligations. An issuer tokenising unlisted shares through a trust structure must design the trustee arrangement carefully: the trust holds the underlying shares while the tokens represent beneficial entitlements, and the interaction between corporate governance rights, trust terms and token transfers requires precise documentation. Disclosure obligations continue to attach to the underlying security, so an issuer cannot treat a tokenised offering as exempt from prospectus-style requirements. Corporate counsel should also consider how shareholder-register functions, dividend and coupon distributions, and voting are operationalised on a distributed ledger that must reconcile with the central registration system.

Exchanges and licensed platforms

Licensed platforms bear the heaviest operational burden. They must manage the retail cap, which requires systems capable of tracking net purchases per investor and, depending on the final interpretation, potentially aggregating exposures. They must maintain custody or arrange for it, reconcile their ledger records with the KSD, and meet the capital and staffing requirements where they manage customer accounts directly. A platform launching a retail-facing fractional product in Phase 1 will need surveillance tooling to enforce the cap, reconciliation processes to align with the central depository, and compliance and technology staff sufficient to satisfy the organisational requirements.

Custodians and securities registries

Custody requirements for tokenised securities in Korea are shaped decisively by the KSD’s continuing role. Because the central depository remains within the registration system, custody models must achieve interoperability between ledger-based records and the KSD’s registration infrastructure. This is not merely a technical matter: the legal certainty of ownership and transfer depends on the two systems producing consistent, reconcilable records. Custodians should expect scrutiny of their reconciliation controls, their handling of discrepancies between ledger and depository records, and their operational resilience. Consider the contrast between tokenising a retail fund and issuing an institutional bond: the retail fund demands robust retail-cap enforcement and investor-suitability controls, whereas the institutional bond issuance concentrates on counterparty eligibility and settlement interoperability with the depository.

How to respond: a practical checklist and suggested comment topics

Written submissions are the formal route to influencing the final rules. Counsel advising issuers, platforms and custodians should prepare targeted comments on the provisions that most affect their clients, and should file before the FSC’s published deadline.

Where and how to submit comments

Comments should be submitted in writing through the FSC’s consultation channel (for proposed subordinate legislation, this is commonly done through the legislative-notice/public-comment process) before the stated deadline. Submissions are most effective when they are specific, cite the relevant provision of the consultation document, explain the practical consequence of the current drafting, and propose concrete alternative language. Vague expressions of support or concern carry little weight; precise drafting suggestions are far more likely to shape the final text.

Suggested comment topics

• Retail cap calculation. Seek clarity on how the net retail-purchase figure is computed, the netting period, and whether exposures aggregate across multiple licensed platforms.
• Interaction with foreign investors. Request clarification on how the retail cap and account-management rules apply to non-resident and institutional foreign investors.
• Custody interoperability and KSD interfaces. Ask for defined technical and legal standards governing reconciliation between distributed ledger registries and the central depository.
• Capital and staffing definitions. Press for precise definitions of “direct management of customer accounts,” the components of the capital measure, and the qualifications expected of compliance and technology staff.
• Grandfathering and transition. Raise the treatment of existing structures, pilot issuances and entities in the process of licensing when Phase 1 commences.

Suggested comment template

• Reference. Identify the specific provision of the consultation document being addressed.
• Issue. State the ambiguity or concern in one or two sentences.
• Impact. Explain the practical or commercial consequence for issuers, platforms, custodians or investors.
• Proposed amendment. Offer concrete alternative wording or a defined clarification.
• Supporting rationale. Reference comparable regimes, investor-protection objectives or operational feasibility.

Comparison: Phase 1 versus the later phase

The table below summarises the principal differences between the first phase and the later extension to public securities, as reflected in the proposals. Confirm specific figures and scope against the final rules.

Compliance checklist for corporate counsel

Where the FSC consultation touches directly on client operations, counsel should begin a structured gap assessment. The following checklist captures the principal workstreams:

• Governance. Confirm board-level oversight of tokenisation activities and clear allocation of responsibility for ledger-based records.
• Capital. Model the capital requirement where the entity manages customer accounts directly, and confirm the components that count towards it.
• Staffing. Establish dedicated compliance and technology functions meeting the organisational requirements.
• Disclosures. Align tokenised-offering disclosure with the obligations applicable to the underlying regulated security.
• AML and KYC. Ensure onboarding and monitoring controls operate across tokenised distribution channels, consistent with Korea’s anti-money-laundering framework.
• Investor suitability. Build systems to enforce the retail cap and any investor-eligibility limits.
• Custody agreements. Document custody and reconciliation arrangements that account for the KSD’s continuing role.
• Technology audits. Schedule independent assurance over ledger integrity, access controls and resilience.
• Operational resilience. Plan for incident response, discrepancy handling and business continuity.
• Reconciliation with the KSD and external audits. Implement controls to reconcile ledger records with the central depository and support external audit.

Counsel advising on cross-border structuring will also want to consider how these obligations interact with existing corporate requirements. For context on related corporate-disclosure obligations, see the Global Law Experts guide How to comply with the English disclosure requirement, South Korea, and for shareholder-limit considerations relevant to tokenised equity, the note on the 3 percent voting cap, South Korea. Entities planning a Korean presence to issue or distribute tokenised products should also review subsidiary versus branch office in South Korea, while transaction structuring around tokenised assets intersects with the analysis in asset purchase versus share purchase, South Korea. For the broader regulatory environment affecting technology-intensive issuers, see the overview of the Industrial Technology Protection Act, South Korea.

What to expect next and the likely enforcement approach

Once the consultation closes, the FSC is expected to review submissions and finalise the subordinate rules ahead of the commencement of Phase 1. Early indications suggest the regulator will adopt a phased supervisory posture consistent with the phased commencement of the rules, concentrating initial attention on the institutional and fractional products in scope and on the integrity of custody and reconciliation arrangements. Industry observers expect the final rules to include clarifications on points raised during consultation, particularly the retail-cap methodology and the definition of direct account management, and to be followed by supervisory oversight by the FSC and the Financial Supervisory Service (FSS) focused on operational resilience and investor protection.

Entities should assume that the supervisory standard will mirror that applied to conventional securities activity, given the functional treatment of tokenised instruments.

Conclusion and recommended next steps

The FSC consultation is intended to convert an enacted statutory principle into an operational regime for tokenised stocks, bonds and funds, and the comment window is the moment for issuers, exchanges and custodians to act. The immediate priorities are clear: review the consultation document in detail, prepare and submit targeted written comments on the retail-cap methodology, capital and staffing definitions, custody interoperability and transition arrangements, and begin an internal gap assessment against the applicable retail cap and capital requirement. In parallel, engage KSD and platform partners on reconciliation and custody models, and consider structuring pilot products aligned with the Phase 1 scope.

Acting within the consultation window positions clients to influence the final rules and to be operationally ready when the framework takes effect. In all cases, verify current dates, figures and scope against the FSC’s official notices before relying on them.

Sources

1. Financial Services Commission (FSC), official consultation notices and documents
2. Korea Law Information Center (Ministry of Government Legislation), text of the Financial Investment Services and Capital Markets Act, the Electronic Securities Act and subordinate rules
3. National Assembly of the Republic of Korea, legislative records
4. Korea Securities Depository (KSD), official information on registration and tokenisation
5. Financial Supervisory Service (FSS), securities market supervision notices