KOREA SETS RULES TO BRING STOCKS AND BONDS ONTO BLOCKCHAIN BY 2027. South Korea has announced operational rules to bring traditional securities onto blockchain platforms, shifting the country’s tokenization efforts from legislative planning to the launch of a regulated market. The Financial Services Commission (FSC) proposed additional regulations on October 1, including distributed ledger requirements, issuer obligations, and off-exchange trading. This legal framework is expected to take effect on February 4, 2027, while the proposed regulations remain open for public comment until November 11. This shift extends beyond the segmented investment products that have dominated South Korea’s previous asset tokenization efforts. Stocks, bonds, and investment funds will ultimately be eligible for issuance and circulation in tokenized form, but regulators are deliberately phasing in market access rather than allowing all types of securities to be placed on blockchain platforms immediately. Tokenization changes the ledger, not the security. The legal structure is critical because South Korea is not creating a distinct type of crypto asset. Under the Financial Investment Services and Capital Markets Act, tokenized bonds remain bonds. Tokenized stocks remain securities. What changes is the infrastructure used to record issuance, ownership, and transfer. The amended Electronic Registration Act legally recognizes distributed ledgers as securities registers. The FSC’s latest regulations then define how these ledgers operate within the existing financial system. The model remains institutionally controlled. Distributed ledgers must be shared among at least two account managers alongside the Korea Securities Depository (KSD). An issuer wishing to directly manage its customers’ securities accounts must have at least 4 billion won in equity, as well as dedicated account management, internal control, and IT staff. https://t.co/eec3kVO2ED This places blockchain within the framework of a regulated securities market rather than outside it. Existing regulations on issuance, disclosure, trading, and investor protection continue to apply. Retail investors are limited to 100 million won. The trading component of this framework introduces another significant change. South Korea plans to add a new OTC trading license category for debt securities, alongside existing categories for unlisted stocks and non-monetary investment trusts. The FSC expects tokenized debt securities to improve retail investor access. Retail access will be capped. An individual investor may purchase a maximum net amount of 100 million won annually per approved OTC exchange—approximately $70,000 USD at current exchange rates. This cap applies per exchange, not as an overall limit across the entire tokenized securities market. This enables retail participation without fully opening the market without restriction from day one. South Korea’s tokenization rollout will occur in three phases. The FSC has divided the transition into three phases, with subsequent phases intentionally lacking fixed launch dates. Timelines will depend on the performance of initial markets, technological development, and progress in establishing separate legislation for stablecoins. The first phase is limited in scope but highly significant. Money market and bond funds managed by institutions may begin testing infrastructure without immediately migrating the entire national public securities market to distributed ledgers. Unlisted stocks may also participate through trust structures, while publicly offered segmented investment securities provide an additional initial use case. The second phase will significantly expand the potential market. The FSC intends to extend asset tokenization to all publicly offered securities, though it has not committed to a specific timeline. The final phase goes beyond asset tokenization. Ultimately, authorities aim to conduct payment and settlement operations on blockchain—including infrastructure linked to stablecoins. FSC Chairman Lee Eog-weon stated earlier this year that foreign markets have already been researching stablecoins for 24/7 and T+0 securities settlement—a capability South Korea seeks to enable with its own infrastructure. This phase depends partly on legislation governing stablecoins; therefore, it should not be interpreted as approval for stablecoin-based payments when the first tokenized securities launch in February. Hanwha is building ahead of market opening. This regulatory framework follows several South Korean financial institutions beginning to develop the necessary technology to utilize it. According to the Seoul Economic Daily, Hanwha Investment & Securities has completed its tokenized-securities platform developed alongside blockchain firm FairSquare Lab.Development began in 2025, and the system is designed to support multiple distributed ledger technologies, including Avalanche and Hyperledger Besu. The selection of Avalanche does not mean that South Korea’s tokenized securities will freely circulate on their public network. Avalanche can support private networks with restricted participation and validation, while the FSC’s framework requires regulated entities to continue participating in maintaining securities records. KSD is also developing infrastructure capable of connecting with Avalanche, Hyperledger Besu, and Hyperledger Fabric. Participation in these distributed ledgers is expected to remain limited to organizations such as custodians and authorized account managers. According to the Seoul Economic Daily, KSD stated that support for Avalanche was added at the request of companies consulting on tokenized securities and related projects, rather than by the custodian’s own initiative. The overlap between private sector systems and the custodian’s infrastructure provides a more solid technical foundation for the February launch than relying solely on the legal framework. The next milestone will occur before any tokenized securities begin trading under the new regime. The FSC’s supplementary regulations remain open for public comment until November 11, after which they will undergo the approval process. Beyond the initial deployment phase, key indicators to monitor include how many issuing organizations adopt the new framework, which OTC exchanges receive licenses, and whether the first phase provides sufficient evidence for regulators to permit public offerings of tokenized securities. By Alexander Zdravkov