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As the financial authorities put out guidelines for the issuance of ‘token securities’, the market is excited. Expectations are high for the opening of new funding markets, but there are also concerns in the industry about regulatory clarity and the profitability of businesses. Attention is focusing on whether the financial authorities’ tightrope walking, which must nurture new markets while protecting investors, will succeed.
■ Should I jump into token securities… Financial industry “concern about balance calculation”
Looking at the Financial Services Commission’s plan to regulate token securities on the 6th, this announcement focuses on activating the issuance of ‘token securities’, which have the characteristics of securities among virtual assets, within the institutional system. In the future, DLT technology will be recognized as a new method of issuing securities, and various token securities will be incorporated into the institutional system. This opens up a new channel of funding within the institutional system. If the Electronic Securities Act is amended, it will be possible to legally raise funds by securitizing various rights, such as intellectual property rights or the right to claim business profits. A representative example is Music Cow, which became a hot topic by splitting the right to participate in music copyright fees into tokens. The industry is tapping the calculator, counting profit and loss. This is because the fact that it falls within the scope of securities also means that strict regulations are applied. ‘Token securities’, like other securities, are subject to various investor protection regulations under the Capital Markets Act. Disclosure is mandatory so that investors can make decisions with sufficient information, and all distribution on unauthorized exchanges is prohibited. As a result, there is a view that the cost of compliance will outweigh the amount of funding that can be raised. An official from a large securities company said, “There is a lot of talk that the cost-effectiveness will not be good as the issuance of token securities is not large,” and “the bad market situation seems to play a part.” Financial authorities took out carrots to revitalize the market. Unlike existing securities, which must be registered in the ledger through a securities company, token securities allow issuers to directly register securities in the distributed ledger. It also expands the range of securities that do not require disclosure. The limit for small public offerings exempted from the obligation to submit securities statements is raised from 1 billion won to 3 billion won through the revision of the Enforcement Decree of the Capital Markets Act. In the case of reinforcing investor protection devices, such as attaching an audit report, the law will be revised to raise the limit of small public offerings to 10 billion won. However, to protect investors, private placement of token securities is prohibited.
■ Regarding the securities controversy… The existing virtual asset industry is also confused
Confusion is spreading in the existing virtual asset industry as well. This guideline also includes criteria for judging the securities properties of virtual assets, but this is because these criteria are ambiguous. If virtual assets are recognized as securities, they are likely to fall under the most comprehensive concept of ‘investment contract securities’ under the Capital Markets Act, but the FSC only specified five legal requirements and two examples of investment contract securities in its guidelines. . Unlike the United States, there are almost no cases of investment contract securities issuance in Korea, so it is difficult for the industry to refer to precedents. Virtual asset exchanges are also sparing their words. An official from Dunamu said, “We are already supporting transactions (listing) after reviewing the securities properties of virtual assets in advance.” can’t,” he said. If existing virtual assets are judged as securities, they cannot be distributed on unauthorized exchanges like Upbit (Dunamu). As for the financial authorities, there remains a task to establish standards for determining securities properties through future cases. An official from the Financial Services Commission said, “Basically, we have no choice but to approach based on examples.” Reporter Lee Jae-yeon [email protected]