Across seven continents, 195 countries, and more than 10,000 cities, jurisdictions worldwide are formulating or refining their stance on the regulation of tokenized securities and Real World Asset tokens (RWA). 

While some jurisdictions claim that the ‘law is clear’ and believe additional clarity isn’t necessary, others are establishing comprehensive frameworks to bolster confidence and foster innovation in tokenization.

Specifically, South Korea, Singapore, and Hong Kong are proving to be at the forefront of regulatory clarity in Asia

While reading, keep in mind that we use the terminology: security tokens, digital securities, and tokenized securities interchangeably. Also, Tokeny is a technology provider, we are not lawyers. 

?? South Korea Security Tokens Regulatory Status:

As a national task for digital financial innovation, South Korea is promoting the reorganization of the token securities issuance and distribution disciplinary system to allow STOs within the rules of the Capital Markets Act.

The FSC, South Korea’s securities regulatory body, earlier this year, clearly stated, “Digital assets corresponding to securities must be issued and distributed in compliance with all securities regulations under the Capital Markets Act.”

This is part of their 17 separate crypto-related legislative frameworks they are putting together to establish the Digital Asset Basic Act (DABA), an all-encompassing legal framework for regulating Korea’s dynamic crypto industry.

The regulator used a unique analogy: The ‘food’ is the same regardless of the container in which it is served. Likewise, a security could be paper-based, electronic (centralized) or based on distributed ledger technology (DLT).

In essence, South Korea acknowledges that security tokens are simply digital versions of traditional securities, but presented differently and are still subject to the same stringent legislation as non-digital securities.

The FSC has outlined specific principles and illustrative examples to help discern which digital assets can be classified as securities:

I have to say, this is pretty impressive and we applaud the FSC’s efforts in their work to actively bring clarity and transparency to instill confidence in innovators who simply want to follow the rules, but do it in a more efficient manner.

?? Singapore Regulatory Status:

Singapore has long been at the forefront, making significant progress in fostering innovation while maintaining rigorous oversight just as traditional securities do.

Similar to South Korea’s regulatory body, the regulatory body of Singapore, the Monetary Authority of Singapore (MAS), regulates based on the characteristics of each digital token, rather than the labels.

Focusing specifically on securities and real-world assets (RWAs), the most relevant categories are capital markets products (CMPs) and asset-backed tokens (ABTs).

In addition, the MAS has introduced the Regulatory Sandbox. This initiative allows fintech companies to test their solutions in a controlled environment with regulators, ensuring compliance with all regulatory standards.

iSTOX, now known as ADDX, is an example of a company who successfully graduated from the sandbox and is now operating a fully-functional end-to-end platform all within the regulatory guidelines set forth by the MAS.

?? Hong Kong Regulatory Status:

Hong Kong was one of the first major jurisdictions to provide regulatory clarity on security tokens.

Specifically, back in 2019, The Securities and Futures Commission (SFC) of Hong Kong released a statement on security token offerings (STOs) essentially stating that as long as all existing securities laws are being complied with then the digital representation or use of a security token is legal.

 

Back in 2019, the crypto and blockchain ecosystem was vastly different with nefarious and fraudulent activity happening everywhere you looked. That’s not to say this isn’t happening today, but for good reason, regulators took a more conservative stance and restricted trading platforms were limited to accredited or professional investors to ultimately project retail.

This past summer, in 2023, the SFC has since relinquished this restriction for retail and will now enable the trading of security tokens assuming the platform receives the proper licensing.

It’s clear to us that the tide is shifting and regulators across the globe are realizing that securities and security tokens are the same instrument, they are just presented in a different manner that we believe is a better one.

Stay tuned for more regulatory updates. Thanks for reading!