Asset tokenization poised to reshape investment landscape
| Inside view of TESSA’s art gallery in Seongsu-dong, eastern Seoul. TESSA provides storage and meticulous care for art owned by investors who have acquired partial ownership of the art showcased here. Courtesy of TESSA |
By Lee Yeon-woo
The era has officially dawned in which various assets such as art, music and real estate can be fractionally divided and traded, much like securities.
Starting in August, operators of services allowing investors to buy and sell portions of ownership or copyrights can register as securities businesses, thereby accelerating their operations in Korea.
The service has gained popularity among young people during the pandemic. But it became the target of financial authorities’ regulations following a controversy over its similarities to securities.
Five domestic operators ― Bancow, TESSA, SOTWO, Art Together and ArtNGuide ― were exempted from such regulations last November in consideration of their market potential. Instead, they were asked to revise their business structures and develop methods to enhance investor protection, including registering as securities businesses.
As both former and new operators are expected to apply for new registrations, the Financial Supervisory Service (FSS) said on Monday that it has completely revised the application form and established a dedicated team for reviewing applications.
Operators are required to establish a bankruptcy insulation mechanism to protect the assets from property damage, and they must deposit investor funds separately. They are also mandated to set standards for explanatory materials and advertising, as well as provide detailed specifications on how disputes are handled and who performs the tasks in the event of business cessation.
“We will review (these applications) thoroughly, including whether the operators have adhered to the revised conditions, in order to facilitate smooth fundraising for corporations and protect investors,” an official from the FSS said.
With specific conditions for the service established, securities companies can expedite their preparation for the emerging securities token offering (STO) market. An STO is a process where companies or individuals issue their various assets as digital tokens using blockchain technology. This is considered one step beyond the current services.
It is believed that fostering the STO market will make it easier to raise funds through a variety of assets, and will significantly expand the range and scope of investments. The relevant market is expected to reach 34 trillion won ($26.5 billion) in 2024, and exhibit growth worth 367 trillion won by 2030.
Securities firms are therefore striving to gain advantages in the market. In February, Shinhan Securities formed the so-called “STO Alliance” with over 50 companies. Other securities firms such as NH Investment & Securities and Korea Investment & Securities have also joined hands with service operators and formed alliances.
Next year, Mirae Asset Securities plans to launch a comprehensive platform where firms can transact their products, while both SK Securities and Kyobo Securities have expanded the role of their digital development departments. On Monday, eBEST Investment & Securities signed a technical cooperation agreement with the blockchain-specialized firm Superblock.
