How Are Tokenized Securities Different From Electronic Shares? Korea Bets on an ‘Asset Department Store’ Strategy

South Korea’s digital securities market is taking shape ahead of the rollout of the tokenized securities, or STO, regime in February 2027. The Korea Exchange is set to open a fractional investment market based on electronic securities, while over-the-counter markets for tokenized securities are also scheduled to launch. That is raising a key question: what distinct edge tokenized securities can offer.

The Korea Exchange plans to open a new securities market for fractional investment products on Nov. 16. Investors will be able to trade fractional investment products in electronic securities form, backed by non-standard assets such as artworks and Korean cattle, through existing brokerage accounts.

Financial authorities said on Sept. 4 that they will expand the scope of tokenized securities from fractional investment to conventional financial products starting in February 2027, including money market funds, privately placed bonds and unlisted shares. They plan to gradually link the framework to public securities offerings and stablecoin-based on-chain payments. The move signals that tokenized securities are being positioned not just for fractional investment, but for broader use across the capital market.

In fractional investment, differentiation from existing electronic securities products has become a central challenge. Once the Korea Exchange market opens, investors will be able to trade fractional investment products through ordinary securities accounts. Full-license decisions for two over-the-counter exchanges that plan to distribute tokenized-securities-based fractional investment products are also due in the fourth quarter. From next year, an exchange-traded market based on electronic securities and an OTC market based on tokenized securities will operate side by side.

Limits to Differentiation Through 24-Hour and Small-Ticket Trading Alone

Industry participants say simply changing the issuance format from electronic securities to tokenized securities may not create a meaningful difference for retail investors.

For individual investors, a financial industry official said, the more important questions are which asset they are buying and what returns they can earn, rather than whether the product is an electronic security or a tokenized security. Twenty-four-hour trading could also be introduced in the existing electronic securities market by extending trading hours, while small-ticket investing is already possible through methods such as fractional trading.

Brokerages expanding their tokenized securities businesses also say blockchain use alone is unlikely to be a competitive advantage. A DB Financial Investment official said 24-hour trading and fractional investment can both be implemented with existing electronic securities. A different issuance method, the official added, does not change a product’s returns or investment value.

Ultimately, tokenized securities will need to show they can bring to market products that are difficult to offer through existing securities markets, or manage rights and settlement information tied to real-world assets more efficiently.

Differentiation Through an ‘Asset Department Store’

Companies in the fractional investment industry say the competitive edge of tokenized securities will come from broader product variety and rights management tailored to physical assets.

Tessa, an art fractional investment platform, said non-standard securities have limits when it comes to fitting into a standardized exchange market because dividend and liquidation methods, as well as investor decision-making structures, differ by issuer and by product. Tokenized securities record rights relationships on distributed ledgers and allow dividend and liquidation structures to be designed to match each product’s characteristics, giving them greater flexibility in accommodating a wide range of non-standard assets.

The model could also lower entry barriers for operators that repeatedly issue products on a project-by-project basis. For securities issued for individual projects such as solar power plants, using an OTC tokenized securities market may be more efficient in time and cost than going through exchange listing requirements and procedures each time.

“The tokenized-securities fractional investment market will eventually resemble a department store of diverse assets,” Tessa Chief Executive Officer Kim Hyung-jun said. “Its distinguishing feature could be that investors can compare and invest in artworks, solar projects and other products from multiple issuers, each with different underlying assets and return structures, within a single market.”

Transparency in Rights and Settlement Is Key

Stockeeper, which operates the Korean cattle fractional investment platform Bankcow, is focused on the ability to tightly link information on underlying assets with investor rights.

Investment contract securities tied to Korean cattle have a clear life cycle, from calf purchases to breeding, shipment, sale and settlement. Because the condition of the underlying asset, investor-specific rights and settlement details must be managed continuously, tokenized securities infrastructure can connect that information within a single digital system, the company said.

Market participants also say the success of tokenized securities will depend less on blockchain technology itself than on the products and services built on top of it. More important than longer trading hours or small-ticket investing, both of which existing electronic securities can already support, will be whether tokenized securities can lower issuance costs for non-standard assets and manage rights and settlement structures transparently.

“The differences investors will actually feel will come from more transparent rights management, faster and clearer settlement, and richer information on underlying assets,” Stockeeper Chief Executive Officer Ahn Jae-hyun said. “How far the market can expand the range of tradable products will also matter.”