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 security token offering, or STO, market and improving the effectiveness of the regulatory framework.

The association delivered an additional opinion paper on the Financial Services Commission’s proposed amendments to subordinate regulations related to tokenized securities at an STO industry meeting hosted by the FSC on Nov. 10. Attendees included the association’s standing vice chairman, Kim Sung-gon, Lee Seung-jun, a lawyer at Barun Law, and officials from LG CNS, Fair Square Lab and the Kaia DLT Foundation.

The paper is a follow-up proposal to the FSC’s legislative notice issued on Nov. 2 on revisions to STO-related subordinate regulations. The association 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 additions to specific clauses, one request for further review and five reference comments.

Among the main proposals were easing distributed ledger operating requirements and adjusting capital requirements for issuer account management institutions. Under the current draft, an electronic registration institution and at least two account management institutions must participate in the distributed ledger. The association proposed a special provision that would allow the ledger to be centered on the electronic registration institution and the issuer account management institution when an issuer manages securities it has issued itself, provided at least one independent validation node operator is included.

The group also proposed applying capital requirements in stages based on business size. At the initial registration stage, it called for the statutory minimum of 1 billion won ($723,000). That would rise to 4 billion won ($2.9 million) if the issuance value of securities under management exceeds 100 billion won ($72.3 million). The association said the approach would preserve investor protection while easing upfront costs for smaller issuers.

It also asked regulators to clarify rules so issuer account management institutions can continue operating existing businesses alongside the new one, and to disclose in advance the standards and procedures for reviewing whether a distributed ledger is suitable. The proposal also said experience in blockchain development, operations and information security should count toward professional staffing requirements, while physical facility standards unrelated to actual business operations should be adjusted on a reasonable basis.

On over-the-counter trading limits for tokenized securities by retail investors, the association proposed reviewing the appropriateness of the cap two years after the system takes effect. It said the current annual net purchase limit of 100 million won ($72,300) per brokerage should remain in place for now, while future assessments should weigh trading volume, liquidity and cases of investor harm. The association is currently running an STO working group with 21 securities firms and 17 technology companies and plans to continue discussions on regulatory improvements.

Kim Jong-won, chairman of the Korea Blockchain Industry Promotion Association, said the meeting provided a chance to convey discussions held by the tokenized securities working group and the practical difficulties faced by technology companies in the field, while also confirming the financial authorities’ position. The association will continue fostering communication between securities firms and technology companies to help establish a Korean-style STO ecosystem that balances active participation by non-financial innovators and tech companies with investor protection, he added.