South Korea Tightens VASP Rules as Tokenized Securities Plan Advances

South Korea is tightening the financial and ownership standards for virtual asset service providers while preparing a regulated market for tokenized securities.

The Financial Services Commission has proposed detailed rules for tokenized stocks, bonds, funds and certain fractional-investment securities. The framework is scheduled to take effect Feb. 4, 2027, after a public-comment period running from Oct. 2 through Nov. 11, 2026.

The measures create two regulatory tracks. Crypto exchanges, custodians and transfer providers remain subject to registration and anti-money-laundering obligations, while tokens representing securities rights fall under South Korea’s capital-markets and electronic-registration laws.

Under rules that took effect Aug. 20, 2026, VASPs must maintain a debt ratio of no more than 200%. Applicants must also show that they have not defaulted during the previous three years and must satisfy requirements covering executives and major shareholders.

The review now extends beyond technical systems and anti-money-laundering controls to financial soundness, corporate ownership and management eligibility. The rules also require adequate personnel, computing infrastructure, cybersecurity systems and internal controls.

South Korea is also expanding the travel rule for crypto transfers. Transfers of at least 1 million Korean won between registered VASPs were already covered by the rule, which requires information about the sender and recipient to accompany the transaction. The revised framework extends the requirement to transfers of all amounts between registered VASPs.

Transfers of at least 10 million won to an overseas VASP or digital-wallet provider must be reported to the Korea Financial Intelligence Unit, regardless of the transaction’s risk rating.

Customer-protection rules require VASPs to separate customer deposits from their own funds and hold at least 80% of customers’ virtual-asset economic value in cold wallets. Providers must also obtain insurance, mutual-aid coverage or reserves for liabilities arising from hacking and system failures.

The separate token-securities framework would permit distributed-ledger issuance and circulation for stocks, bonds, funds, non-monetary trust beneficiary certificates and investment-contract securities.

Those ledgers would have to be shared among at least two account-management entities and the Korea Securities Depository. Issuer account-management entities would need minimum equity capital of 4 billion won, along with specified account-management, internal-control and information-technology staff.

The commission also plans to add an over-the-counter licensing unit for debt securities. Retail investors would face an annual net-purchase limit of 100 million won per OTC exchange.

The approach places the legal nature of the asset at the center of the system. A blockchain-based record does not by itself change whether an asset represents a stock, bond, fund interest or another securities right. For market participants, the main compliance questions are therefore what rights the token conveys, who controls customer assets and which regulated activity the business performs.

The measures remained proposals during the comment period, and the Feb. 4, 2027, start date remained subject to required approvals.