Korea advances in formalizing asset tokenization

Financial Service Commission Vice Chairman Kim So-young speaks during the conference co-hosted by the government and the International Monetary Fund (IMF) at a hotel in Seoul, Thursday. Newsis

Yeolmae Company first to resume investment service after halt in 2022

During the first half of 2024, at the earliest, investors will be able to trade fractions of traditional assets ― such as real estate and art ― by using security tokens in the stock market.

The Financial Service Commission (FSC) recently convened a regular meeting and authorized the Korea Exchange to establish a market for buying and selling security tokens through competitive trading methods.

Investors in these products have been facing the disadvantage of having their funds tied up for extended periods, due to the lack of market tradability. For instance, once an investor purchases shares of artwork from the issuer, it is challenging to liquidate this investment until the issuer sells the asset and distributes the profits. The introduction of the new market is expected to alleviate this limitation to some extent.

However, the FSC stated it will not permit the listing of "uncertain business" like real estate project financing (PF). It has also set boundaries against assets linked to gambling, such as casinos.

"The underlying assets for tokenization must undergo objective value measurement and assessment," the FSC said in its guideline. "Issuers are required to estimate investment conditions, such as price and quantity, and disclose the results to investors."

FSC Vice Chairman Kim So-young also spoke highly of the potential of tokenized securities.

"Most of the innovation (in the digital asset market) is expected to occur in token securities," Kim said during the conference co-hosted by the government and the International Monetary Fund (IMF) on Thursday. "Unlike virtual assets, tokenized securities possesses intrinsic value."

He added that discussions are underway in the National Assembly to improve existing regulations concerning tokenized securities.

Yayoi Kusama's "Pumpkin," crafted in 2001 / Courtesy of Yeolmae Company

Meanwhile, the first officially approved platform in the asset tokenization industry resumed operations on Friday.

As reported by the Financial Supervisory Service (FSS), Yeolmae Company, an art trading platform, has received authorization to sell shares of Yayoi Kusama's artwork "Pumpkin." The subscription period is set to run from Dec. 18 to 22, with the auction results to be announced on Jan. 4 of the following year.

In April 2022, financial authorities ordered a halt of such services, citing their similarity to securities. It then directed operators, including Yeolmae Company, to submit applications and legally register as securities businesses before proceeding with asset tokenization.

An FSS official stated that this registration marks the first instance of tokenized securities being integrated into the regulatory framework. "We will conduct a comprehensive review to support the incorporation of asset tokenization investment within the regulatory system," the official said.