As the bill on security token offerings (STO) passes a National Assembly standing committee and legislation accelerates, securities firms are moving quickly to prepare for the opening of the token market. Major securities firms are setting up separate task forces (TF) or strengthening related departments as they prepare to enter the token market.
According to the financial investment industry on the 8th, the amendments to the Financial Investment Services and Capital Markets Act and the Electronic Securities Act that passed the National Policy Committee on the 27th are designed to provide a legal basis for the issuance and distribution of security tokens, with full-fledged market activation expected from next year.
STO refers to the issuance of security-type tokens, converting real assets such as real estate and artworks into Blockchain-based electronic securities to enable small-scale investment and trading.
Major securities firms including DB Securities, Korea Investment & Securities, Meritz Securities, and Mirae Asset Securities are rapidly launching new organizations ahead of the STO market's opening.
In particular, DB Securities formed a new "digital asset new business promotion team" last month and assigned 2–3 dedicated staff. The team is in charge of the STO issuance business and is focusing on drawing up initial business plans and selecting underlying assets.
A DB Securities official said, "Although legislation has not yet been completed, we are working with trust companies that handle custody and management of real assets to identify underlying assets such as real estate and artworks, and we are partnering with existing corporate finance departments to review a variety of asset classes."
Korea Investment & Securities also set up a "virtual asset TF" in March this year and is promoting work related to security tokens and virtual assets. A Korea Investment & Securities official said, "We have an organization for stablecoins and security tokens, and that organization is reviewing trademark registrations and business-related matters."
In July, Meritz Securities created a department in charge of digital assets and is pushing forward new-business tasks including STO. Around the same time, Mirae Asset Securities created a "digital asset business division" to prepare for the institutionalization of STO. The division is responsible for studying how STO institutionalization affects the market in advanced markets such as the United States.
Even if they have not created a new organization or TF, securities firms are pursuing STO-related businesses within existing departments and preparing for STO institutionalization. At NH Investment & Securities, the existing "digital sales department" is in charge, while at Daishin Securities Co., the "platform solutions department" handles STO-related business.
Although the specific details of the STO bill have not all been finalized, securities firms are moving to increase their STO market share in areas where preparation is possible.
Securities firms are also actively joining STO-related consortia. STO distribution takes place on over-the-counter exchanges (distribution platforms), and for preliminary approval as an over-the-counter exchange to be selected as a distribution platform, three applicants have applied so far: ▲ the KDX (Korea Exchange (KRX))-led consortium ▲ Lucent Block ▲ the NEXTRADE (NXT) consortium.
Securities firms are joining these consortia to help build market infrastructure. More than 20 securities firms, including Mirae Asset Securities, KB Securities, Kiwoom Securities, Meritz Securities, and Hanwha Investment & Securities, are participating in KDX.
However, not all details of the STO-related bills have been fleshed out. The current bills establish the grounds for issuance and distribution of STOs, but do not specify details on STO infrastructure, investment limits, and so on.
Securities firms also say they need concrete bills in place to begin business planning. A Meritz Securities official said, "We need clear guidelines or legislation to proceed with the STO business, so the business has not yet been made concrete," adding, "Other than participating in the Korea Exchange (KRX) consortium, nothing is certain yet."
A Mirae Asset Securities official said, "If token securities are issued in the market, securities firms are expected to either create token securities that market participants can transact or play a role in enabling free buying and selling of token securities listed in the distribution market," adding, "Because legislation has not yet been completed, it is difficult to specify what we can do in terms of issuance and distribution. We will have to wait until the guidelines are released."
Meanwhile, if the STO bills are finally passed at the plenary session this month, the process will move to preparing detailed rules such as enforcement decrees. The Democratic Party said it will convene an extraordinary session on the 10th of this month.
If uncertainties over supervisory rules and infrastructure building are resolved, competition among the fractional investment industry's products and business models and among securities firms for early market dominance is expected to intensify.