Korean blockchain group submits five STO rule revisions to FSC

Five proposed revisions could ease entry into South Korea’s tokenized-securities market, according to an additional opinion letter the Korea Blockchain Industry Promotion Association submitted to the Financial Services Commission. The association disclosed the proposal on Nov. 11, after an FSC-hosted STO industry meeting held a day earlier.

The proposal followed the commission’s Nov. 2 legislative notice for amendments to STO-related subordinate regulations and reflected feedback from member companies. It targets regulatory burdens facing non-financial companies and blockchain technology firms seeking to enter the market.

Attendees included Kim Sung-gon, the association’s standing executive vice chairman, and Lee Seung-jun, a lawyer at Barun Law LLC. Officials from LG CNS, Fair Square Lab and the Kaia DLT Foundation also attended. The letter, titled “additional opinion letter on the legislative notice for amendments to subordinate regulations related to tokenized securities,” contained five proposed revisions or new provisions, one request for review and five reference opinions.

What changes in the distributed ledger?

The association proposed easing distributed-ledger operating requirements while retaining a defined role for independent infrastructure providers. Under the current draft, the ledger must include the electronic registration institution and at least two account management institutions.

The proposal would create a special exception for an issuer managing securities it issued itself. In that case, the ledger could center on the electronic registration institution and the issuer account management institution, provided the structure includes at least one independent validation node operator.

How would capital standards vary?

Capital requirements would be tiered according to business size, according to the association. At the initial registration stage, it proposed applying the statutory minimum of 1 billion won ($720,000), rising to 4 billion won ($2.9 million) when the issuance value of securities under management exceeds 100 billion won ($72 million).

That creates a step-up from 1 billion won for smaller operations to 4 billion won above a 100 billion won issuance threshold. The association said the tiering would preserve investor-protection safeguards while reducing upfront cost burdens for small and mid-sized issuers.

Which operating rules would also change?

The association also requested four operational changes:

• Allow issuer account management institutions to continue their existing businesses alongside the new STO role.
• Disclose the standards and procedures for distributed-ledger suitability reviews in advance.
• Reflect blockchain development, operations and information-security experience in professional staffing requirements.
• Reasonably adjust physical-facility standards unrelated to actual operations.

Would retail trading limits change?

The proposal would retain the existing limit on retail investors’ annual net purchases of tokenized securities: 100 million won ($72,000) per brokerage firm. The association said that amount would remain unchanged under its submission.

It would reassess the cap two years after the system takes effect. That review should comprehensively consider trading volume, market liquidity and cases of investor losses.

Who is driving the proposal?

The association’s STO working group comprises 21 securities firms and 17 technology companies as discussions about 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.”

If adopted, the tiered capital floor and conditional ledger structure would change how issuers enter the market before the proposed two-year reassessment of retail trading limits begins. The association specified no adoption date, leaving the FSC’s consideration of the five revisions as the next decision point.