South Korea needs to move faster on overhauling its payment framework if it wants to draw global capital into the token securities (STO) market launching in February, industry officials say. Allowing transaction proceeds to move on the blockchain as well would reduce the currency conversion, remittance and settlement burdens facing overseas investors and improve access to domestic assets.
The National Assembly's National Policy Committee has yet to set a date for public hearings on the Digital Asset Basic Act, according to financial investment industry officials on the 30th. Disagreements over the framework for issuing and supervising stablecoins have persisted since the bill was introduced in June last year. Proposals discussed included giving priority to consortiums in which banks hold a majority stake, a unanimous-consent body at the Bank of Korea and a committee of related agencies under the Financial Services Commission, but no agreement was reached.
The timeline for introducing on-chain settlement also remains undecided. The FSC plans to connect stablecoins and other instruments as means of payment in three stages, but the subsequent schedule depends on stablecoin legislation and technological progress.
Even if overseas investors hold funds in blockchain wallets, currency conversion and remittance through the banking network are still required as long as settlement of domestic token securities takes place only through conventional accounts. Linking stablecoins and other payment instruments to the securities ledger would tie fund transfers to securities purchases and payments, cutting both steps and costs. To maximize the effect, rules on foreign currency exchange, cross-border transfers and foreign investment need to be overhauled as well.
Building a foundation for trading and settlement across time zones is expected to broaden the base of overseas investors in domestic assets and increase the chances of drawing capital from the global real-world asset (RWA) market, which tokenizes government bonds, corporate bonds and real estate.
The U.S. has already put in place both a legal basis for payment instruments and the conditions for trading experiments. The framework for issuing and supervising payment stablecoins was established under the GENIUS Act enacted in July last year. It takes effect on Jan. 18 next year or 120 days after major regulators publish their final implementing rules, whichever comes first.
Washington is also easing trading rules for tokenized securities. A procedural vote to begin Senate consideration of the CLARITY Act failed on the 15th of last month, but the Securities and Exchange Commission (SEC) announced an "innovation exemption" for tokenized stock trading two days later. The measure conditionally exempts trading facilities and liquidity providers that meet certain requirements from the definitions of exchange and dealer for five years. It does not fully permit on-chain settlement, but it expands the scope for experimentation using existing law and regulators' authority.
An official in the financial investment industry said that connecting the institutionalization of token securities to global capital inflows requires a settlement environment that makes it convenient for overseas investors to invest in domestic assets, adding that legislating payment instruments such as stablecoins should proceed alongside an overhaul of foreign exchange and remittance rules to improve access to the domestic market.
Legal liability is also cited as a barrier holding back more aggressive moves by securities firms. Unlike conventional closed networks, distributed ledgers make it difficult to assign blame when errors occur, yet the electronic securities law retains an open-ended obligation to make up shortfalls: if tokens are over-issued because of a computing error, the securities firm serving as account manager must buy them on the market with its own capital and retire them. Industry officials say institutional buffers are needed, such as a cap on liability for computing failures beyond a firm's control or joint guarantee insurance.
An executive in charge of token securities at a major brokerage said clear published guidelines, a roadmap for the second-stage public offering framework and interoperability standards are urgently needed to reduce trial and error and deliver stable services from February.
