FINANCIAL REGULATORY INNOVATION COMMITTEE DISCUSSES MEASURES TO ALLOW THE ISSUANCE OF STO

The financial regulatory innovation committee (FRIC) held its 6th meeting on January 19 and discussed measures to improve regulations in capital markets. The measures include establishing a regulatory framework on the issuance and distribution of security tokens to permit security token offerings (STOs) and to promote development of a safe secondary market.

SUMMARY OF REMARKS BY FSC CHAIRMAN KIM JOO-HYUN
The measures to establish a regulatory system on the offering and
distribution of security tokens, intends to (a) allow securities digitized with distributed ledger technologies to safely and legally protect investors’ property right on security tokens, (b) to permit immaterialization of securities into security tokens and issuance of
security tokens without intermediation of a securities firm when certain conditions are met and (c) to institutionalize OTC (over-the-counter) platforms to facilitate safe transactions of security tokens in the OTC markets that already established investor safeguards. Through these measures, domestic capital markets are expected to more proactively embrace futuristic technological changes such as digital transformation, thereby promoting new industries creation and market building driven by securitization of diverse assets, which will help emergence of innovations across the economy through capital markets.

DETAILS OF AGENDA ITEMS
SETTING UP REGULATORY FRAMEWORK ON SECURITY TOKEN OFFERING & DISTRIBUTION
(BACKGROUND) Need to embrace into a regulatory framework distributed ledger technologies and the demand for security token offering and distribution that have been rapidly growing amid digital transformation
(KEY DETAILS) Permit STOs, which have not been allowed under the current legal system, and establish a safe distribution system for security tokens
a) (DETERMINING A FINANCIAL SECURITY) Provide principles
for determining if an investment is qualified as a security, to enhance the foreseeability on the application of the Financial Investment Services and Capital Markets Act (FSCMA) to security tokens, a new type of securities issuance
b) (ESTABLISHING REGULATORY SYSTEM ON SECURITY TOKENS) Permit issuance and distribution of security tokens
– Embrace security tokens as digitalized securities under the Act on Electronic Registration of Stocks and Bonds
– Allow issuance of security tokens without an intermediating securities firm when certain conditions are met
– Institutionalize OTC platforms for investment contract securities and beneficiary certificates

Download) 230119 Financial Regulatory Innovation Committee Discusses Measures to Improve Capital Market Regulations

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