South Korea Classifies ‘Blockchain-Based Token’ as ‘Securities; Details

South Korea has added a layer of regulations over the crypto sector. On Monday, February 6, the nation announced that all blockchain-based tokens operational within its territories, will be treated under the ‘securities’ category of assets. Investment instruments that do not require any additional fee such as maintenance charges, expect for the original investment are treated as ‘securities’ in South Korea. The Asian nation has, in recent times, been accelerating efforts to regulate the crypto sector to keep pace with the next gen fintech technologies.

The Financial Services Commission (FSC) of South Korea has said that the security-like characters linked to any cryptocurrency will be determined on a case-by-case bases. The evaluations will be reported to the FSC by crypto exchanges, brokers, and issuers of crypto tokens.

Those digital assets that commonly serve as stakes in businesses or have issuers who attribute profits generated by the token among investors — will be eligible to be treated as securities in South Korea.

A study by the FSC had stated that the crypto market in South Korea had touched the valuation of $46 billion (roughly Rs. 3,66,318 crore) by the end of 2021, with the number of users reaching nearly 5.58 million or around 10 percent of the country’s population.

South Korea’s government said to be working on drafting detailed rules to ensure that investors in the sector are safeguarded against financial risks and that the crypto assets are not misused for illicit purposes. These new guidelines around the classification of crypto tokens have been announced to prepare South Korea’s financial sector for the upcoming crypto rules.

Tokens that will not be classified as securities will be governed by the new laws that are expected to be announced soon. South Korea aims to allow entities to directly issue security tokens for an over-the-counter market to keep their usage easy and widespread under regulatory oversight.

The nation’s Ministry of Justice is reportedly constructing the ‘Virtual Currency Tracking System’ to prevent cases of money laundering via crypto.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.