South Korea Sets Tokenized Securities Rules for 2027
South Korea's Financial Services Commission (FSC) has released a detailed draft framework for tokenized securities, covering everything from equity capital thresholds and staffing requirements to a new over-the-counter exchange licence and retail investment caps. The rules are scheduled to come into force on 4 February 2027, the same date that amendments formally recognising distributed ledger technology (DLT) as eligible infrastructure for securities issuance and circulation are set to take effect. For accounting firms, auditors, and CFOs dealing with Korean counterparties or considering exposure to Korean digital capital markets, the proposal is worth reading now, not after the public consultation closes on 11 November 2026.
What the FSC Has Actually Proposed
The draft covers the full lifecycle of a tokenized security: issuance, circulation, custody, and secondary trading. Its scope is broader than many observers expected.
Asset types in scope
The proposal explicitly brings stocks, bonds, funds, and certain fractional investment securities within the tokenized securities perimeter. That last category is particularly significant: fractional investment instruments, which allow retail participants to hold a proportionate interest in an underlying asset, have operated in a regulatory grey area in Korea. Bringing them on-chain under a defined legal wrapper clarifies the treatment of the underlying asset for accounting and disclosure purposes.
Capital and staffing requirements for issuers
Any company that issues tokenized securities while also directly managing customer accounts must hold a minimum of KRW 4 billion in equity capital, equivalent to roughly USD 2.8 million at current rates. The draft also requires dedicated compliance and technology personnel, a requirement that signals the FSC is treating operational resilience as a precondition for authorisation, not an afterthought.
Firms that outsource custody and account management to a licensed intermediary face a different, likely lower, capital threshold, though the FSC has not yet published the specific figure for that category.
A new OTC exchange licence for debt securities
Separately, proposed revisions to capital markets regulations would introduce an additional over-the-counter exchange licence specifically for debt securities. This is a structural change that creates a new category of regulated venue alongside existing exchange infrastructure. Firms acting as bond dealers or operating fixed-income desks that interact with Korean counterparties will need to assess whether their current arrangements remain appropriate under the revised framework.
Retail investment cap
The proposal caps retail investor net purchases at KRW 100 million, approximately USD 70,000, per OTC exchange per year. This is not a total portfolio limit but a per-venue cap, meaning a retail investor could in principle access multiple exchanges. However, the mechanism still introduces a reporting and monitoring obligation on exchange operators that will flow directly into their compliance and bookkeeping infrastructure.
Accounting Implications for Firms and CFOs
The FSC's proposed framework does not override existing accounting standards, but it does create new fact patterns that firms need to map to those standards before the rules go live.
Recognition and classification of tokenized securities
A tokenized security is a digital representation of a traditional financial instrument recorded on a distributed ledger. Under both IFRS 9 and Korean International Financial Reporting Standards (K-IFRS), the classification of a financial instrument depends on the contractual cash flow characteristics of the underlying asset and the entity's business model, not on the form in which it is recorded. That means a tokenized bond is still a debt instrument for accounting purposes and must be classified accordingly, either at amortised cost, fair value through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL), depending on the holder's model.
What changes is the measurement complexity. Tokenized securities that trade on the proposed new OTC venues will generate observable market prices, which may alter the fair value hierarchy level applied in notes to financial statements. Firms currently measuring comparable instruments at Level 3 (unobservable inputs) may find that active OTC trading pushes those holdings into Level 2.
Stablecoin accounting and settlement assets
Korea's tokenized securities framework does not itself authorise stablecoins as settlement assets. Settlement mechanics on DLT platforms will depend on separate regulatory decisions. That said, firms already exploring stablecoin accounting in cross-border or multi-jurisdiction contexts, particularly those monitoring stablecoin accounting and MiCA compliance implications in the EU, should note that Korea's framework creates demand for an approved settlement layer. How that layer is ultimately structured will have direct balance sheet consequences.
Fractional securities and derecognition
The inclusion of fractional investment securities raises a specific derecognition question. When an originator tokenizes an asset and sells fractional units, it must assess whether it has transferred substantially all the risks and rewards of ownership under K-IFRS 9 / IAS 39 principles. If the originator retains a residual interest, the asset may remain on its balance sheet even though legal title to units has been transferred on-chain. This mirrors the derecognition challenges that have emerged in tokenized fund structures globally, including the infrastructure questions raised by tokenized fund shares on distributed ledger infrastructure in other jurisdictions.
Audit and disclosure readiness
Auditors working with Korean issuers or Korean-facing platforms will need to build procedures around DLT-based records. The FSC's requirement for dedicated technology staff at issuing entities is a positive signal, but it does not automatically mean those entities will produce audit-ready data. Firms should be asking counterparties now: what ledger infrastructure are you planning to use, how are records reconciled, and what access will auditors have?
Tax Implications: What Changes at the Corporate Level
Korea's Corporate Tax Act does not currently contain bespoke provisions for tokenized securities. That means the tax treatment of transactions in tokenized stocks, bonds, or fund units will, for now, follow the treatment of their conventional equivalents. A tokenized corporate bond coupon is taxable interest income; a gain on disposal of a tokenized share is subject to the standard securities transaction tax and, for corporate holders, to corporate income tax.
The more nuanced issue is timing. On-chain settlement can be near-instantaneous, but the tax event (realisation of gain or income) is still determined by the legal substance of the transaction, not by when a block is confirmed. Firms need to ensure that their crypto bookkeeping software or digital asset accounting software captures the correct economic date of settlement and not merely the blockchain timestamp, which could differ from the contractually agreed settlement date in some hybrid structures.
Transfer pricing teams at multinationals with Korean subsidiaries should also flag this development. If a Korean subsidiary begins issuing or holding tokenized securities, the arm's length pricing of any intra-group transactions involving those instruments will need to be benchmarked against the new OTC market data as it develops.
What Happens Between Now and February 2027
Consultation and approval timeline
The public consultation period runs from 3 October to 11 November 2026. Following that, the FSC will process submissions and move through a formal approval process before the 4 February 2027 effective date. That timeline is tight. Firms that want to influence the final text, or that need to model compliance scenarios against it, should be engaging now rather than waiting for a final version.
Infrastructure decisions that cannot wait
The requirement for dedicated compliance and technology staff at issuing entities is a hiring and systems decision, not just a regulatory filing. Firms planning to issue tokenized securities in Korea, or to provide intermediary services to Korean issuers, need to start those conversations with their technology vendors and recruitment teams in Q4 2026. The FSC is unlikely to grant grace periods for staffing deficiencies given the specificity of the requirement in the draft.
Similarly, the new OTC exchange licence for debt securities means that any firm currently operating or planning to operate a fixed-income trading venue in Korea will need to assess whether its existing licence covers the proposed activity or whether a fresh application is required. Given typical regulatory approval timelines, a February 2027 start is ambitious without an early application.
Systems and reporting readiness
The retail investment cap of KRW 100 million per OTC exchange introduces a real-time or at least daily monitoring obligation. Exchange operators will need systems capable of tracking cumulative net purchases per retail client across the reporting period. That data must then feed into periodic regulatory reports. Firms reviewing their crypto accounting software stack should confirm whether their current tooling supports per-client, per-venue position tracking at the granularity the FSC is likely to require.
Frequently Asked Questions
Which securities can be tokenized under the FSC's proposal?
The draft includes stocks, bonds, funds, and certain fractional investment securities. All would be eligible for issuance and circulation in tokenized form on distributed ledger infrastructure once the rules take effect.
What is the minimum capital requirement for a tokenized securities issuer?
Companies that issue tokenized securities and directly manage customer accounts must hold at least KRW 4 billion (approximately USD 2.8 million) in equity capital, along with dedicated compliance and technology staff.
How does the retail investment cap work?
Retail investors would be limited to net purchases of KRW 100 million (approximately USD 70,000) per OTC exchange per year. The cap applies per venue, so a retail investor with accounts at multiple licensed OTC exchanges would face the limit on each individually.
Does the framework change how tokenized securities are accounted for under K-IFRS?
No direct change to accounting standards is proposed. Tokenized securities retain the accounting classification of their underlying instruments under K-IFRS / IFRS 9. However, the creation of active OTC markets may affect the fair value hierarchy level applied to holdings previously measured using unobservable inputs.
When does the public consultation close and when do the rules take effect?
The consultation period closes on 11 November 2026. Subject to the approval process, the regulations are scheduled to take effect on 4 February 2027, alongside amendments that formally recognise distributed ledgers as eligible securities infrastructure.
Source: Cointelegraph