Korea Blockchain Industry Promotion Association Submits STO Rule Change Proposals to FSC

The Korea Blockchain Industry Promotion Association said on Nov. 11 that it had submitted additional proposals to financial authorities aimed at lowering barriers to entry in the tokenized securities, or STO, market and improving the effectiveness of the regulatory framework.

At an STO industry meeting hosted a day earlier by the Financial Services Commission, the association delivered an "additional opinion letter on the legislative notice for amendments to subordinate regulations related to tokenized securities" that reflected feedback from its member companies. Attendees included Kim Sung-gon, the association's standing executive vice chairman; Lee Seung-jun, a lawyer at Barun Law LLC; and officials from LG CNS, Fair Square Lab and the Kaia DLT Foundation.

The submission is a follow-up proposal to the FSC's legislative notice issued on Nov. 2 for amendments to STO-related subordinate regulations. The association said it focused on reducing regulatory burdens that non-financial companies and blockchain technology firms may face when entering the tokenized securities market. The document consists of five proposed revisions or new provisions, one request for review and five reference opinions.

Key proposals included easing distributed-ledger operating requirements and adjusting capital standards for issuer account management institutions. Under the current draft, the distributed ledger must include the electronic registration institution and at least two account management institutions. The association proposed a special exception under which, when an issuer manages securities it issued itself, the ledger could be structured around the electronic registration institution and the issuer account management institution, provided at least one independent validation node operator is included.

The association also called for capital requirements to be applied on a tiered basis according to business size. At the initial registration stage, it proposed applying the statutory minimum of 1 billion won ($720,000). That would rise to 4 billion won ($2.9 million) if the issuance value of the securities under management exceeds 100 billion won ($72 million). It said the approach would preserve investor-protection safeguards while reducing upfront cost burdens for small and mid-sized issuers.

The proposal also asked for clearer rules allowing issuer account management institutions to continue their existing businesses alongside the new one, and for the standards and procedures for distributed-ledger suitability reviews to be disclosed in advance. It also included reflecting blockchain development, operations and information-security experience in professional staffing requirements, and reasonably adjusting physical facility standards that are unrelated to actual operations.

On over-the-counter trading limits for tokenized securities by retail investors, the association proposed maintaining the current cap and reassessing its adequacy two years after the system takes effect. The existing standard of annual net purchases of 100 million won ($72,000) per brokerage firm would remain unchanged. Any future review, it said, should comprehensively assess trading volume, liquidity and cases of investor losses. The association is currently operating an STO working group comprising 21 securities firms and 17 technology companies as discussions on regulatory improvements continue.

Kim Jong-won, chairman of the Korea Blockchain Industry Promotion Association, said the meeting allowed the group to convey discussions from the tokenized securities working group and the practical difficulties faced by technology companies in the field, while also confirming the position of financial authorities. He added that the association would continue facilitating communication between securities firms and technology companies and work to establish a Korean-style STO ecosystem that balances investor protection with active participation by non-financial innovative companies and tech firms.