South Korean regulators plan to provide stablecoin settlement services for tokenized assets

Where will the tokenization process of Korean securities go?

South Korea is planning to expand blockchain-based securities applications from current share investment products to stocks, bonds and funds, and is expected to eventually make stablecoins part of its settlement infrastructure. The Financial Commission (FSC) and the Financial Supervisory Authority (FSS) released a three-phase roadmap on Friday, with a starting point set for February 4, 2027, the day when amendments related to recognizing blockchain-based securities take effect. Its long-term goal is to build a digital capital market infrastructure that can support tokenized issuance, trading and on-chain settlement of traditional asset classes.

"Authorities will work to lay the foundation to promote the tokenized issuance and circulation of more traditional types of securities, including stocks, bonds and funds, and ultimately achieve a comprehensive transformation and upgrade of capital market infrastructure to enhance digital connectivity." Quan Daying, Vice Chairman of the Financial Committee, said.

This plan marks South Korea's move beyond the experimental phase of tokenization that focuses solely on share ownership. Regulators are preparing a framework that will hopefully allow most public securities to operate within existing regulated financial systems through infrastructure linked to blockchain. This is significant for a market with 11.3 million verified cryptocurrency users and high participation in digital assets and domestic stock markets. South Korea's large retail investor base gives tokenized securities the potential to become mainstream market products rather than experimental products with institutional participation only.

What happens in Phase 1?

The first phase begins in February 2027 and focuses on asset classes that regulators believe are suitable for controlled deployment. These assets include private money market funds and corporate bonds for institutional investors, publicly issued share investment securities, and certain unlisted shares. The initial stage of tokenization of unlisted equity will adopt a trust structure. The underlying shares will remain in the existing securities system, and investors will receive tokenized trust beneficiary securities that represent their interests.

If the first phase goes well, regulators plan to open the infrastructure more widely to public offerings of securities. The timing of the second phase will depend on market adoption, technology development and the performance of the initial framework. The Finance Committee cited existing overseas projects, such as BlackRock's BUIDL tokenized fund and Hong Kong's tokenized green bonds, as reference points for the South Korean model.

Investor Revelation

South Korea views tokenization as part of its capital market infrastructure rather than as a separate cryptocurrency product. If the roadmap is successful, blockchain will become part of traditional securities issuance, trading and even final settlement without having to move it out of the regulated financial system.

How will retail investors and financial institutions be treated?

Existing licensed securities companies and brokers will be allowed to process tokenized securities within their current licenses, thereby avoiding the need for separate authorization if assets are issued or traded in tokens. Regulators will impose stricter conditions on companies that want to directly manage securities accounts. Companies that manage their own tokenized securities investor accounts for non-bank issuers need to have at least 4 billion won (approximately US$3 million) in capital and have a team of employees dedicated to account management, compliance, information technology and cybersecurity.

Retail participation will also be restricted. The individual subscription cap is 30 million won (approximately US$22,000) or 5% of the total issuance, whichever is lower. Annual net purchases made through over-the-counter (OTC) tokenized securities platforms are limited to 100 million won (approximately US$74,000) per platform. In addition, over-the-counter trading platforms need to consult the Financial Supervisory Authority before operating. This structure not only leaves room for regulators to expand the tokenized market, but also limits the concentration of retail funds that may cause risks due to lower initial liquidity than traditional listed securities.

When will stablecoins enter the settlement system?

The third phase is the most critical for the digital asset market because it will connect tokenized securities directly to stablecoin-based settlement infrastructure. Under this model, investors can eventually use regulated digital currencies to purchase and settle blockchain-based securities, rather than relying entirely on traditional payment channels. This will reduce the separation between tokenized assets and the trading cash legs, allowing both parties to the transaction to run on the chain. The specific timetable has not yet been determined. Regulators said the subsequent phase will depend on the results of the first phase, adoption by financial institutions and pending stablecoin legislation.

South Korea is advancing in tandem with other Asian financial centers exploring blockchain settlement. Japan is developing plans for a national blockchain settlement system covering stocks and government bonds, while Singapore has been strengthening its framework for regulated stablecoin activities. The Finance Committee plans to propose amendments to the sub-regulation by the end of September. The more important test will begin in February, when South Korea determines whether tokenization can expand from limited products to infrastructure that supports one of Asia's largest retail investment markets.