The Korea Exchange (KRX) has applied for an innovative financial service to create a pilot market for new securities, signaling a groundbreaking move in the financial world. Industry experts have anticipated the potential opening of a Security Token Offering (STO) market. This development also means a revolution for the cryptocurrency field.
Fueling the Fire: KRX’s Move Towards Tokenized Securities Market
Sources reveal that the Korea Exchange submitted an application to the Financial Services Commission (FSC) on September 29th, seeking approval for an innovative financial service to launch an on-exchange market for tokenized securities.
This move is in line with the FSC’s pre-approved pilot plan, which aims to open the way for markets focusing on investment contract-based securities and non-monetary trust income-based securities.
Regulatory Green Light: The Future of Tokenized Securities
While awaiting the final decision of the Innovative Financial Services Review General Committee, the ambitious initiative of the Korea Exchange could reshape market dynamics. If approved, investment contract-based securities and trust-preferred securities will be allowed for distribution in the market.
This will have a significant consequence as the move will deviate from the existing restriction that excludes tokenized securities from over-the-counter trading.
Stage is Set: KRX’s Strategic Timeline and Vision
After receiving the green light from the Financial Services Commission, the Korea Exchange is speeding up its preparations for the tokenized securities distribution market. The exchange plans to hold a comprehensive briefing session for businesses interested in issuing tokenized securities or engaging in over-the-counter trading at the beginning of next year.
KOSDAQ also aims to improve its system, considering the sensitivities of the sector, and ensure reasonable levels of disclosure obligations regarding the listing or trading of tokenized securities.
Tokenized Securities: A Comprehensive Market Evolution
The Korea Exchange emphasizes that this initiative goes beyond a traditional STO, unlike a narrow focus on tokenized securities. An official from the Korea Exchange clarified, “This is not an STO, it is a pilot market for newly listed securities.”
Once regulatory approval is granted, it will pave the way for the finalization of market operating regulations, resulting in a potential market opening in the first half of next year.
While the announcement signifies a significant milestone for the financial sector, the actual trading of tokenized securities may take time even after the market opens. The timeline from application to listing typically takes around six months, similar to the current listing process in the securities market.
In a broader context, the move towards tokenized securities is in line with the announcement made by the Financial Services Commission in February, highlighting the issuance of various rights that are difficult to implement through traditional electronic securities in the form of tokenized securities.
