FSC to Allow Fractional Investment Securities Backed by Multiple Real Estate Properties

2nd Meeting of the Public-Private “Token Securities Council”

“Supporting Token Innovation... Emphasizing Investor Protection”

“Setting OTC Trading Limits to Expand Initial Market Liquidity”

The financial authorities are pushing to promote the activation of security token offerings (STO), including allowing the issuance of fractional investment securities backed by multiple real estate properties as underlying assets. The authorities also plan to set the over-the-counter (OTC) trading limits in a way that expands market liquidity.

The Financial Services Commission announced on the afternoon of May 15 at the Government Complex Seoul that these topics were discussed during the second meeting of the Public-Private “Token Securities Council.” The council was launched in March to design detailed systems related to the institutionalization of token securities, which will be implemented in February 2027 under the Electronic Securities Act and the Capital Markets Act.

At the meeting, the council discussed several topics related to the upcoming amendment of subordinate regulations and guidelines for the institutionalization of token securities, which are scheduled to be announced in July. The key areas included: ▲ eligibility of underlying assets for fractional investment securities and measures to support innovation ▲ expansion of asset types eligible for tokenization and preparation of related infrastructure ▲ designing the market structure for distribution and trading.

Vice Chairman Kwon Dae-young, who presided over the meeting, stated, “The forthcoming token securities ecosystem must strike a balance between innovation and trust,” adding, “We will uphold the fundamental principles of market order and investor protection, but will not take a regulation-only approach. For example, we will promote measures to allow the issuance of fractional investment securities by pooling the same type of underlying assets within a certain range.” Currently, pooling of underlying assets for issuing fractional investment securities is prohibited. The Financial Services Commission plans to develop best practice guidelines for the issuance of fractional investment securities, balancing innovation and trust by specifying requirements for eligible underlying assets and disclosure in securities registration statements.

The authorities are also working to expand the scope of assets eligible for tokenization and to build the necessary infrastructure. In particular, they plan to establish a detailed step-by-step roadmap to prevent conflicts with existing systems and infrastructure. Vice Chairman Kwon said, “With the issuance of green bonds in Hong Kong and U.S. money market funds (MMFs) as STOs, there are various attempts to tokenize not only novel securities like fractional investments, but also traditional securities. We must also prepare at a rapid pace. Since converting electronic securities into STOs could potentially cause conflicts with existing systems and infrastructure, we will prepare tests and infrastructure improvements to support innovation at every stage.”

Additionally, regarding distribution, the council will design a market structure that ensures fair competition and investor protection by setting requirements for OTC exchange licensing by security type, scope of permitted concurrent business operations, and trading limits. The goal for the STO OTC exchanges is to enhance trading efficiency while ensuring investor protection. Vice Chairman Kwon stated, “We will set OTC trading limits to both systematize investor protection and expand initial market liquidity. Regarding requests to improve predictability of licensing policies, we will gather feedback on the permissible scope of concurrent licensing for various OTC markets, such as unlisted stocks and fractional investments.”

The council plans to announce the amendment of subordinate regulations and guidelines for the institutionalization of STOs in July. An official from the Financial Services Commission stated, “While enhancing trading efficiency, we all agree on the necessity of designing a market structure that ensures fair competition and investor protection, and we will continue to discuss the details further.”

This content was produced with the assistance of AI translation services.