As South Korea intensifies its push for crypto regulation, lawmakers have advanced a bill to establish a legal framework for issuing and trading security token offerings (STOs) using distributed ledger technology (DLT).

Lawmakers Amend Framework For Tokenized Securities

On Thursday, South Korea’s National Assembly passed key amendments to the Capital Markets Act and the Electronic Securities Act, creating a legal framework for the issuance and distribution of tokenized securities.

According to an official government release, the revised rules define tokenized securities as a broad category that extends to both debt and equity products, and recognize them as legitimate financial instruments.

The amendments to the Electronic Securities Act will allow qualified issuers to launch tokenized securities using distributed ledger technology. Meanwhile, the Capital Markets Act changes will enable the products to be traded as investment contract securities on brokerages and other licensed intermediaries.

Notably, the existing Capital Markets Act prohibited the distribution through securities firms, deeming investment contract securities “unsuitable for distribution due to their non-standard characteristics.”

The changes are “expected to enhance accessibility to investments and improve the provision of investment information for these securities,” the official government release stated.

After legislative approval, the bill will be submitted to the State Council, followed by official presidential promulgation. Therefore, the legislation is expected to be enacted one year after being signed into law, tentatively in January 2027.

Moreover, the Financial Services Commission (FSC) is set to lead the implementation, forming a joint “Token Securities Council” with relevant agencies to ensure seamless preparatory work, including the development of supporting infrastructure and enhanced safeguards.

The consultation body will comprise the FSC, the Financial Supervisory Service, the Korea Securities Depository, the Financial Investment Association, industry participants, and experts.

South Korea’s Crypto Regulatory Push Continues

This major step follows South Korea’s efforts to develop and establish clear, comprehensive rules to regulate the local crypto industry. Last week, the government shared its 2026 Economic Growth Strategy, which included a plan to open its market to Bitcoin (BTC) Exchange-Traded Funds (ETFs) this year.

Crypto-based ETFs have been banned in South Korea since 2017. In 2024, the country’s regulator reaffirmed its stance after the US Securities and Exchange Commission (SEC) approved the investment products. However, it has now cited the success of the US and Hong Kong’s crypto funds as a key factor for their shift.

The FSC will also accelerate the next phase of its digital asset legislation this quarter to establish a clear regulatory framework for stablecoins. As reported by Bitcoinist, South Korea’s Second Phase of the Virtual Asset User Protection Act was delayed until the start of 2026 due to an ongoing disagreement between the FSC and the Bank of Korea (BOK).

The financial authorities have been clashing for months over rules related to the issuance and distribution of stablecoins, disagreeing on the extent of banks’ role in the issuance of won-pegged tokens.

Nonetheless, the main policies of the crypto framework have been decided, set to include investor protection measures, such as no-fault liability for crypto asset operators and isolation of bankruptcy risks for stablecoin issuers.

Moreover, the country is lifting its long-standing ban on institutional crypto trading, which is anticipated to begin later this year. According to local reports, the FSC is considering a rule to limit corporate cryptocurrency investments at 5% of a company’s equity capital.

Under the latest proposal, eligible firms would be able to allocate up to 5% of equity capital per year to digital assets, limited to the top 20 cryptocurrencies by market capitalization. The final draft version could be released as early as January or February.

• The proposal would let regulators suspend transactions before gains are laundered or moved.
• Authorities want to extend stock market-style enforcement tools to crypto trading.
• Recent actions by tax and financial regulators show tighter alignment with traditional finance rules.

South Korea’s financial regulators are reviewing whether to allow transactions to be suspended before suspected price manipulators can move or launder gains.

The idea is to act earlier in fast-moving crypto markets, where profits can be transferred quickly and become harder to trace.

If adopted, the change would mark a significant step in the country’s second phase of crypto regulation, which is expected to expand beyond user protection and address market abuse more directly, alongside work on stablecoin rules that are yet to be formally introduced.

Early intervention tools

The Financial Services Commission, or Financial Services Commission, is reviewing a payment suspension system that would allow regulators to block crypto transactions at an earlier stage.

Local outlet Newsis reported on Tuesday that the proposal would enable authorities to act before suspected manipulators cash out or launder potentially illicit profits.

Under the current framework, freezes often depend on court warrants.

That process can take time, giving suspects room to conceal funds. Regulators argue that crypto markets move faster than traditional assets, making delays more costly.

The proposed system would mirror tools already used in South Korea’s stock market, where accounts linked to suspected manipulation can be frozen before profits are realised.

Closing enforcement gaps

Market watchdogs have flagged specific tactics that can generate large but unstable gains in crypto trading.

These include front-running, automated wash trading, and placing high buy orders that inflate prices.

Such profits can vanish quickly once assets are moved off exchanges.

Regulators say crypto markets require stronger tools because assets can be transferred into private wallets with relative ease. This mobility, they argue, makes early intervention critical.

Lessons from capital markets

South Korea has already expanded its powers in traditional finance. Amendments to the Capital Markets Act, an Capital Markets Act, took effect in April 2025.

These changes allow account freezes for suspected unfair trading or illegal short sales.

According to reports, the FSC discussed extending similar measures to crypto during a closed-door meeting in November.

The talks took place while authorities were reviewing the first price manipulation case handled under the amended capital markets rules.

South Korea adds on regulatory tightening

The proposal builds on a series of measures highlighting South Korea’s effort to bring crypto regulation in line with standards applied in conventional financial markets.

On Oct. 10, the National Tax Service warned that cryptocurrency holdings kept in cold wallets remain subject to enforcement, noting its authority to conduct home searches and seize offline storage devices in tax evasion investigations.

On Dec. 7, the Financial Services Commission examined the idea of applying bank-style liability to crypto exchanges, which would require platforms to compensate users for losses caused by hacks or system failures even in the absence of proven negligence.

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