Legislative Momentum and Institutional Innovation Fuel Bank Expansion into Security Tokens
South Korea’s major banks are fast-tracking efforts to break into the burgeoning tokenized securities market, following the reintroduction of a critical bill aimed at establishing a legal framework for security tokens. The bill, reintroduced at the National Assembly by Representative Kim Jae-sub of the ruling People Power Party, is sparking renewed optimism within the sector. It seeks to lay a legal foundation for Security Token Offerings (STO) and establish comprehensive investor protection guidelines.
“The institutionalization of STO reflects the demand in the market for securities issuance utilizing distributed ledgers and will serve as a catalyst for the emergence of new and diverse forms of securities in the future,” Kim stated. A similar bill, proposed during the 21st National Assembly in July last year, ultimately failed to pass.
Security tokens, which enable assets like real estate and artworks to be divided into fractional units and traded on blockchain-based platforms, represent a blend of traditional securities and digital assets. Unlike cryptocurrencies such as Bitcoin, these tokens are regulated under South Korea’s Capital Market Act, due to their nature as investment assets tied to distributed ledger technology.
NH NongHyup Bank is leading the charge, recently concluding the development of its own security token issuance platform. After being selected as a blockchain dissemination project operator by the Ministry of Science and ICT in June, the bank has accelerated its preparations. NH NongHyup is now testing the platform with an anticipated launch by the end of next month, a move that would make it the first major player in the tokenized securities market.
Once operational, NH NongHyup’s platform will allow fractional investment companies and other entities to issue security tokens while handling key roles in account management, data storage, and transaction verification. “We aim to enhance the platform’s functionality through testing with various fractional investment operators, bringing it to a level readiness for immediate commercialization,” a representative from the bank remarked.
Shinhan Bank, meanwhile, is approaching the market from a different angle. Rather than focusing on token issuance, it aims to serve as a facilitator by supporting accounts and managing funds. To advance this model, Shinhan signed a strategic agreement with Sejong Telecom in June to bolster services linked to B-Brick, a real estate fractional investment service. Additionally, Shinhan partnered with Yeolmae Company, an art fractional investment platform, in January to further its foothold in the sector.
Hana Bank has opted for a consortium approach, aligning itself with Mirae Asset Securities and Hana Securities to advance its plans for a token securities platform. Woori Bank, for its part, took an early interest in security tokens by establishing a dedicated department in 2023, where it has since been working on platform development.
“Many large financial institutions are making significant infrastructure investments to enter the token securities market. The reason is that they view security tokens as a future growth opportunity,” noted an official from a fractional investment firm. “They will have to move forward by establishing a system that allows for collaboration with existing players in the market.”
As South Korea lays the groundwork for security tokens, it joins other nations where tokenized assets are rapidly gaining traction. According to Dataintelo, a U.S.-based market research firm, America’s token securities market has seen an average annual growth rate of 27%, reaching a valuation of $1.5 billion as of last year. For South Korean banks, the convergence of legislative support and technological advancement offers a promising entry into this high-growth sector.
