Security Token

A security token has the characteristic that, by applying blockchain technology throughout the issuance and distribution structure, it can secure efficiency and accessibility that were difficult to achieve in the existing securities market.

In particular, it offers various institutional and technical advantages in terms of the issuance procedure, the trading environment, and the investment method.

The most significant change in this amendment to the Electronic Securities Act is that a distributed ledger has been legally recognized as an ‘electronic registration account book.’

As a result, records of the creation, modification, and extinguishment of securities rights stored on a blockchain now carry the same legal effect and presumption of rights as a conventional centralized electronic registration account book.

This means that security tokens have been incorporated into the regulatory system not as a structure built solely on technical convenience, but while maintaining the core elements of capital market trust intact.

One of the systems newly introduced through the amendment to the Electronic Securities Act is the ‘issuer account management institution’ system.

An issuer that meets certain requirements for equity capital, computing facilities, professional personnel, and a system to prevent conflicts of interest may, by registering with the Financial Services Commission, directly perform electronic registration tasks using a distributed ledger for the security tokens it issues.

This expands flexibility in the issuance structure while, at the same time, imposing stronger management and oversight responsibilities on the issuer than before.

The former Financial Investment Services and Capital Markets Act presumed investment contract securities to be ‘atypical rights with low potential for distribution’ and applied only limited regulation to them.

After the amendment, however, that presumption was removed, and investment contract securities now become subject to the same issuance, distribution, and brokerage regulations as other securities.

This opens a path for free distribution even after issuance while, at the same time, imposing clear legal responsibilities on issuers and platform operators.

For trading, brokerage, arrangement, and the design of distribution structures related to security tokens, the determination of illegality depends on whether the Financial Services Commission has granted authorization or registration.

Arranging transactions without authorization or operating a transaction structure among investors may constitute an unauthorized financial investment business.

Conduct such as the above may be assessed as a violation of Article 11 of the Financial Investment Services and Capital Markets Act and, depending on the case, may result in punishment under Article 444 of the same Act.

Because many security tokens are based on atypical assets, the scope and content of the information needed for investment decisions can easily become unclear.

In this process, omitting material facts or describing an asset’s value or profit structure inaccurately
may be treated as fraudulent trading under the Financial Investment Services and Capital Markets Act.

In particular, providing false information, exaggerating returns, and concealing information that has a material effect on investment decisions
are highly likely to become subject to punishment.

A company planning a new asset securitization model or platform service must first assess whether the business qualifies as a ‘security’ under the Financial Investment Services and Capital Markets Act and into what type of security it would be classified.

At this stage, the key is to legally analyze the substance of the underlying asset and the investment return structure in order to decide whether to apply for the regulatory sandbox or to pursue a formal registration route.

A company must meet the legal requirements to register as an ‘issuer account management institution’ or design a collaborative framework with a reliable account management institution.

In particular, it is important to build a company-wide compliance system covering the management authority over the distributed ledger, the legal effect of smart contracts, and the protection of investor deposits.

At the stage of operating a direct distribution structure or linking with an over-the-counter distribution platform after issuance, the focus must be on preventing unfair trading and on managing rights afterward.

Rather than stopping at a one-time issuance, governance must be advanced so that the company can flexibly respond to market monitoring, disclosure updates, regulatory investigations, and changes in the legal framework.

From the planning and design stage, Daeryun Law Firm comprehensively reviews whether an instrument qualifies as a security under the Financial Investment Services and Capital Markets Act and which regulations apply, providing advice that can minimize the potential for future legal disputes and sanctions.

Token securities have a structure that continues to require disclosure, rights management, total volume management, and investor protection obligations even after issuance.

Through legal review of whether registration as an issuer account management institution is required, the method of operating the distributed ledger, and the structure of smart contracts, Daeryun Law Firm systematically manages compliance risks that may arise during the operational stage.

Businesses related to token securities are highly likely to become subject to ongoing monitoring and follow-up investigation by financial authorities.

In particular, when suspicions of unlicensed business, provision of false or exaggerated information, or unfair trading are raised, the matter may expand beyond administrative sanctions to criminal liability.

In preparation for fact-finding investigations, requests for the submission of materials, corrective orders, and sanction proceedings by supervisory authorities, Daeryun Law Firm establishes legal defense arguments and response strategies in advance, and provides practical responses when disputes arise.

By newly establishing a Digital Finance Group, Daeryun Law Firm provides stage-by-stage legal advice centered on the interpretation of the Financial Investment Services and Capital Markets Act and the Electronic Securities Act, covering ▲assessment of security status and structural design ▲issuance and distribution compliance ▲response to unlicensed business and unfair trading ▲supervisory investigations and dispute response.

Through this, the firm helps to control regulatory risks that may arise during the introduction of token securities in advance and supports stable business operations.

Together with Daeryun, the ninth-largest law firm in Korea (based on 2025 value-added tax filings with the National Tax Service), we encourage you to prepare in advance a security status assessment and stage-by-stage legal response strategy suited to your company's token securities business structure and distribution method.

If you need legal advice regarding token securities, 🔗schedule a legal consultation to have your matter reviewed by a specialist.