Policy Catalysts Remain for South Korea Markets After Pullback, With STO Rules and Foreign Inflows in Focus

South Korea’s financial markets still face several key policy events in the second half of the year despite a recent stock-market correction, with capital-markets reform and digital-asset initiatives still on the agenda. The main variables include the institutionalization of security tokens, or STOs, and efforts to improve conditions for foreign investors.

Financial authorities plan to roll out a series of measures in the second half, including subordinate rules for security tokens, expanded incentives for foreign investment, follow-up changes to the cornerstone investor system and an overhaul of venture-investment rules, according to officials on July 24.

The most closely watched item is the formal rollout of the STO framework. The Financial Services Commission plans to release subordinate regulations and guidelines this month following revisions to the Electronic Securities Act and the Capital Markets Act. The package is set to include standards for assets eligible for fractional investment, disclosure requirements, the licensing structure for over-the-counter security-token exchanges and investor trading limits.

Market participants view the guidelines as a chance to spell out a roadmap for tokenizing not only art, real estate and intellectual property, but also traditional financial assets such as stocks and bonds. The related law is scheduled to take effect in February 2027 after infrastructure is put in place.

Improving rules for the initial public offering market also remains unfinished business. The cornerstone investor system, which passed the National Assembly in April, is awaiting updates to enforcement decrees and detailed rules. Once introduced, the system is expected to expand long-term participation by institutional investors and help improve IPO pricing and early post-listing share-price stability.

The Financial Services Commission is also continuing policies aimed at attracting foreign investors. It is pushing to launch Korea Premium Week and expand English-language disclosures, while using the omnibus account system already introduced for foreign investors to improve overseas investors’ access to the domestic market. The Korea Exchange is also pursuing market-structure reforms and the expansion of digital-finance infrastructure, including securities tokenization, as a medium- to long-term task.

Follow-up legislation to spur venture investment is also due in the second half. Key measures include broader tax support for venture investment and a longer lifespan for the fund of funds, with the focus on strengthening long-term funding channels for startups and innovative companies.