STO legislation has a long way to go… What are the current overseas situations?
US, exemption from issuance disclosure obligation when issuing token securities
Japan, in the process of legislating STs, which are standard securities such as stocks and bonds
Singapore, exemption from regulations when issuing private equity and recruiting institutional investors
Samil PwC, “Korea, establishment of infrastructure related to token securities must come first”
This article has been translated into English through AI.
While tokenized securities offering (STO) markets around the world are gradually establishing systems, there are concerns that the Korean market is not keeping up with the pace of institutionalization in the global market. Concerns are being raised that the 21st National Assembly has concluded without processing STO-related bills, and the newly opened 22nd National Assembly has a long way to go as there are no lawmakers with STO expertise.
The US has various regulatory exemptions… Favorable for early-stage corporate financing
Unlike the domestic market, overseas countries have begun preparing for the institutionalization of STOs. According to the report ‘Understanding Piecemeal Investment and STO Market Outlook’ published by Samil Accounting Corporation, in the US, the Securities and Exchange Commission (SEC) announced STO guidelines in 2017, and the market was evaluated to have stabilized quickly.
The US currently applies the same regulations as securities if digital assets issued through STOs are determined to be securities. It has also created several provisions, such as exempting issuance disclosure obligations when issuing token securities. In the US, when issuing token securities, you can register with the SEC, or you can apply for exemption regulations such as △Regulation D (private offering), △Regulation A (small-scale offering), and △Regulation CF (crowdfunding).
In the case of token securities trading platforms, you can receive approval from an alternative trading system (ATS) and register as a broker/dealer with the SEC and the Financial Industry Regulatory Authority (FINRA). Token securities exchanges manage listed token securities, provide custody services, and manage qualified investors. In the industry, it is evaluated that token securities issuance has various exemptions, making it advantageous in terms of raising funds for early-stage companies.
Japan focuses on raising funds other than piecemeal investments such as stocks and bonds
Japan applies the same regulations to STO issuance as stocks. Japan incorporated STOs into the institutional system through the revision of the Financial Instruments and Exchange Act in May 2020. Japanese token securities are defined as property values that can be transferred using an electronic information processing organization according to the Financial Instruments and Exchange Act.
Japan, like Korea, interprets token securities as maintaining the essence of ‘securities’ in its legislation. In Japan, token securities are treated and applied like existing securities based on the Financial Instruments and Exchange Act. In addition, both on- and off-exchange distribution platforms are expected to grow, and among them, it is predicted that financial institutions under the institutional system will be the center of the market.
Currently, unlike Korea, Japan is in the process of legislating regulations on stocks and bonds, which are typical securities, and is focusing on the aspect of fund raising other than piecemeal investment. In addition, it has enabled blockchain platform companies to conduct issuance and bookkeeping. The Osaka Digital Exchange (ODX) was opened and trading began in December 2023, and the overall progress is evaluated to be fast.
Southeast Asia also takes the lead in institutionalizing STO… “It is essential to complete the legal and regulatory environment in Korea”
Meanwhile, in Singapore, which announced the STO guidelines in 2017, issuers of token securities must comply with related regulations such as △issuing and registering an investment prospectus, △obtaining a capital market service license, and △anti-money laundering and anti-terrorist financing. On the other hand, in cases of △small-scale recruitment, △issuing only to private equity, and △recruiting only to institutional investors and qualified investors, regulations such as issuing an investment prospectus can be exempted.
Malaysia’s private STO market appears to be revitalizing. In 2019, the Malaysian Securities Commission announced an order related to capital market services. At the time, it stated that although digital tokens are regulated as securities, they are not legal tender or means of payment regulated by the central bank. In 2020, it announced the Digital Asset Guidelines, which allowed various regulatory exemptions for issuing token securities, operating platforms, and providing services.
Experts point out that although domestic companies are jumping into the STO market, the system is not keeping up. Samil Accounting Corporation pointed out that “various stakeholders, including banks, securities firms, fragmented investment companies, and even blockchain infrastructure companies, are rapidly entering the token securities market, but the institutional and legal foundations are not supporting this.”
In the process, they emphasized that “in order to activate the Korean STO market, the establishment of infrastructure related to token securities must come first, and for this, the completion of related systems and legal regulatory environments is essential,” and “Therefore, it is urgent to establish the institutional foundation above all else.”