South Korea to Tokenize All Securities in Three Stages from 2027
South Korea's Financial Services Commission has confirmed a three-stage roadmap to tokenize every category of securities, covering stocks, bonds, and funds, starting when the country's securities token law takes effect on 4 February 2027. The plan sets out which instruments come first, who can trade them, how settlement will eventually move on-chain, and what capital requirements non-bank issuers must meet. For accounting firms, auditors, and CFOs with Korean exposure, the details matter now, not in 2027.
The Regulatory Backdrop
The FSC's announcement followed the third meeting of its tokenized securities consultative body, held on the same day the plans were published. South Korea has already passed the underlying securities token legislation, and the February 2027 effective date is fixed. The FSC cited BlackRock's BUIDL tokenized fund and Hong Kong's tokenized green bond programme as reference points for the infrastructure it intends to build, signalling that the framework is modelled on live, institutionally accepted precedents rather than experimental concepts.
Why a Three-Stage Structure
The phased approach is deliberate. Rather than opening every asset class simultaneously, the FSC wants stage one to act as a proving ground. Only if that phase delivers stability will the regulator expand scope. That conditionality is important for risk managers: there is no automatic progression, and the regulator retains discretion to hold or accelerate each transition.
Stage One: Private Markets and Unlisted Shares (February 2027)
The first stage is targeted squarely at institutional investors. Two instrument types are in scope from day one.
Private Money-Market Funds and Corporate Bonds
Private money-market funds and privately placed corporate bonds will be the opening assets for tokenization. These instruments are already restricted to professional or institutional participants under Korean securities law, so the regulatory perimeter stays relatively tight during the initial phase.
Unlisted Equity via a Trust Structure
Unlisted shares will be handled through a trust mechanism rather than direct tokenization of the underlying share register. The shares remain on the existing central securities infrastructure; what investors receive is a tokenized trust-beneficiary security that represents their economic interest. This is a meaningful design choice: it preserves the integrity of the legacy settlement system while letting the token layer carry the trading and transfer functions. For accountants, that split has balance-sheet implications, since the token and the underlying legal title sit in different places.
Stage Two: Expanding to Public Markets
If stage one proves stable, the infrastructure widens to publicly offered securities. The FSC has not published a fixed timeline for this transition; it is explicitly contingent on stage one performance. Listed equities, publicly offered bonds, and retail-accessible funds would come into scope at this point, which is when the compliance and accounting demands scale considerably, since the investor base broadens from institutional to general public.
Stage Three: On-Chain Settlement with Stablecoins
The third and most consequential stage for crypto accounting professionals introduces on-chain settlement infrastructure. At this point, investors would be able to settle tokenized securities transactions using stablecoins directly on-chain, removing the need to route cash through traditional correspondent banking or central securities depositories for the settlement leg.
Stablecoin Accounting Becomes a Securities Accounting Problem
This is where stablecoin accounting and securities accounting converge. Once a stablecoin is used as settlement currency for a regulated security transaction, it is no longer just a crypto treasury question. It enters the scope of trade-date accounting, failed-settlement provisions, and potentially margin and collateral rules. Firms that have not yet established a functional accounting policy for stablecoins used as a medium of exchange, rather than a speculative holding, should treat stage three as the forcing function for doing so. The G20's recent push for clearer digital asset frameworks, covered in our analysis of G20 backing for digital asset innovation and stablecoin accounting clarity, reinforces that on-chain settlement is becoming a systemic expectation, not a fringe use case.
Licensing, Limits, and Capital Rules
The FSC has resolved one of the most commercially sensitive questions upfront: existing securities brokerages and trading firms can handle tokenized securities without needing an additional license. That removes a significant barrier for incumbents and means established Korean broker-dealers are not disadvantaged relative to crypto-native entrants on pure licensing grounds.
OTC Exchanges and Retail Purchase Limits
Over-the-counter exchanges occupy a different category. They must consult the Financial Supervisory Service before operating in tokenized securities, and retail investors trading on those platforms face an annual net-purchase cap of 100 million won, approximately $74,000, per venue. That limit is per platform, not aggregate across all OTC venues, which creates a structural incentive for issuers to list across multiple platforms to maximise retail distribution within the regulatory ceiling.
Non-Bank Issuer Registration Requirements
Non-bank institutions that want to run investor accounts for their own token securities face specific registration conditions. The FSC requires a minimum of 4 billion won in equity capital (roughly $3 million), alongside dedicated staffing across account management, compliance, and IT functions. This is not a light-touch regime. A $3 million equity floor plus headcount obligations puts the issuer-account function out of reach for smaller fintech participants unless they partner with a licensed entity. For accounting firms advising clients considering this route, the equity capital requirement needs to appear in any feasibility assessment from day one.
Accounting and Tax Implications for B2B Readers
The three-stage plan generates a sequence of accounting questions that Korean-exposed firms need to begin addressing now, before the February 2027 go-live date.
Classification of Tokenized Trust-Beneficiary Securities
Under IFRS 9, the classification of a financial instrument depends on the business model and contractual cash flow characteristics of the holder, not the form of the instrument. A tokenized trust-beneficiary security representing an interest in unlisted shares is likely to be classified at fair value through profit or loss unless it meets the SPPI (solely payments of principal and interest) test, which an equity-linked instrument almost certainly does not. Firms holding these instruments will need to mark them to fair value at each reporting date, creating P&L volatility from day one of stage one.
Stage Three: Stablecoin Settlement Entries
When stage three introduces stablecoin settlement, each settlement leg will require a derecognition entry for the stablecoin used and a recognition entry for the security acquired (or the reverse on disposal). If the stablecoin has experienced any movement from its peg between acquisition and settlement date, that movement is a realised gain or loss on the stablecoin, separate from any gain or loss on the security. Firms need a sub-ledger capable of capturing both legs at the correct timestamps. The SEC's parallel work on tokenized securities infrastructure in the US, discussed in our piece on the SEC's proposed transfer agent overhaul for tokenized securities, suggests that on-chain settlement accounting will become a global firms issue, not just a Korean one.
Tax Treatment of Token Securities Disposals
Korea's Virtual Asset User Protection Act and the broader digital asset tax framework will intersect with the securities token law. Whether a disposal of a tokenized trust-beneficiary security is taxed under the securities gains tax regime or the virtual asset gains tax regime is not yet clarified in the FSC's published plans. Firms should flag this ambiguity to Korean tax counsel immediately, since the rate and reporting obligations differ materially between the two regimes.
Capital Adequacy for Non-Bank Issuers
The 4 billion won equity capital requirement must be monitored continuously, not just at registration. If a non-bank issuer's equity falls below the threshold due to trading losses or write-downs, it risks losing its registration. Auditors reviewing these entities should include the capital threshold in their going-concern and regulatory compliance checklists from the first audit cycle after registration.
What Firms Should Do Before February 2027
The five months between now and the stage one effective date are not a grace period; they are a preparation window. Accounting firms with Korean clients in the securities or asset management sector should prioritise three things. First, assess whether any client holds or plans to hold tokenized trust-beneficiary securities and establish the IFRS 9 or K-GAAP classification policy in advance. Second, review existing chart-of-accounts structures to ensure tokenized instruments can be recorded separately from conventional securities and from crypto assets. Third, confirm with Korean tax counsel which disposal gains regime applies to tokenized securities, and document that position before the first transaction occurs. The broader regional trend toward tightening crypto compliance, visible also in our recent coverage of South Korea's KOFIU crypto AML enforcement push, means regulators will be watching the quality of record-keeping from the outset.
Frequently Asked Questions
Which securities will be tokenized first in South Korea?
Stage one, beginning February 2027, covers private money-market funds and privately placed corporate bonds for institutional investors, and unlisted shares tokenized through a trust structure. Publicly offered securities come in stage two, contingent on stage one stability.
Do existing broker-dealers need a new license to trade tokenized securities?
No. The FSC confirmed that existing securities brokerages and trading firms can deal in tokenized securities under their current licenses. OTC exchanges must consult the Financial Supervisory Service first, and retail investors on those platforms face annual purchase limits.
What is the annual retail purchase limit on OTC platforms?
Retail investors trading tokenized securities on OTC exchanges are subject to a net-purchase cap of 100 million won (approximately $74,000) per venue per year. The limit applies per platform, not as an aggregate across all venues.
How should a tokenized trust-beneficiary security be classified under IFRS 9?
Because the instrument is linked to equity rather than delivering solely payments of principal and interest, it is unlikely to pass the SPPI test. The default classification would be fair value through profit or loss, requiring mark-to-market at each reporting date. Firms should confirm this analysis with their technical accounting team given the novelty of the instrument structure.
What capital is required for a non-bank institution to run investor accounts for token securities?
The FSC requires a minimum of 4 billion won (approximately $3 million) in equity capital, plus dedicated account management, compliance, and IT staff. This threshold must be maintained on an ongoing basis, not just at the point of registration.
Source: The Block