South Korea Takes Major Step Toward Cryptocurrency Legalization with New Guidelines on Securities Tokens
South Korea has taken a major step towards bringing crypto into the mainstream as the country’s main financial regulator introduces new guidelines on security tokens.
Under the new guidelines, security tokens, defined as financial assets issued by a centralized party and tokenized on a blockchain, will be brought into a regulated environment with the same rules that applies to the country’s traditional financial market.
The new guidelines were published by South Korea's Financial Services Commission (FSC) on Monday.
According to FSC, stablecoins will not be defined as security tokens under the new rules. It is also clear that tokens with no centralized issuer, in other words those that are sufficiently decentralized, will fall outside the scope of the new regulations.
“[…] digital assets corresponding to securities must be issued and distributed in compliance with all securities regulations under the Capital Markets Act,” FSC said on its website.
In terms of stablecoin regulation, South Korean regulators have previously indicated that they want to work with international counterparts, saying the policy must be formed “in a manner that is consistent with overseas regulations.”
Bringing crypto into the mainstream
The new plan to better regulate security tokens is seen as part of a broader effort to bring crypto into the mainstream in South Korea, and could also be seen as a de facto legalization of crypto.
The country is in the midst of a deeper push to regulate the crypto sector, and lawmakers in the nation’s parliament are currently considering 17 different regulatory frameworks related to crypto. The aim is that all of the new rules will form part of a comprehensive legal framework for crypto known as the Digital Asset Basic Act.
Only bitcoin is a commodity in the US
In the US, the chair of the Securities and Exchange Commission (SEC), Gary Gensler, has made it clear that while he sees bitcoin (BTC) as a commodity given its level of decentralization, other cryptocurrency may be considered securities for regulatory purposes.
In the US context, such a distinction is extremely important, given that securities are traditionally regulated in a much more comprehensive manner than commodities.