South Korea Set to Categorize Certain Crypto Assets as Securities


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South Korea’s Financial Services Commission (FSC) announced plans to regulate crypto assets and securities in line with the appropriate regulations.

According to an announcement from the Commission’s Capital Market Division, investors should expect that blockchain-based tokens will be treated as conventional securities citing that they meet the same definition provided by South Korea for securities.

The Capital Market Act defines securities as financial investment instruments for which investors are not obligated to top up a previous investment. 

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Digital assets which fall into this category are those which give a stake in the operation of a business. Other conditions include those which provide a right to dividends or residual property or those which extend profit generated from the business to investors. 

Also, the FSC explained that stablecoins are likely to not be categorized as securities because they are backed by the value of an existing fiat currency. Additionally, they are used as a payment option as well as a medium of exchange.

Another group of crypto assets that may not fall into the category of securities are those which do not have an issuer or do not “fulfill the obligations commensurate with the investor’s rights”.

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South Korea Broadens Crypto Classification 

Eventually, all those assets that qualify as securities will be regulated under the Capital Market Law. On the other hand, non-securities will be regulated under a new regulatory framework for digital assets which is still being prepared. Token issuers and cryptocurrency exchanges are saddled with the responsibility of deciding on the assets that fit into each of the categories through a case-by-case evaluation.

Amidst all these, the regulator clarified that these tokenized assets will not be a new class of securities. As interpreted by a machine translator, “The food does not change no matter what container it is served in.” and “Suitable bowls may vary depending on the type of food,” while attempting to explain that tokenized assets are just another container.

Officials in South Korea are already doing so much to give perspective to the crypto industry in the region. Last year, the regulators proposed additional changes to the Digital Assets Bill to give them more control over crypto exchanges. Recently, the South Korean Ministry of Justice announced plans to launch a cryptocurrency tracking system that will be charged with monitoring transaction history amongst many other details.

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