With the rollout of the security token offerings (STOs) regime three months away in February next year, critics say Korea is not ready with the digital assets and market infrastructure needed to settle transactions. Debate has focused on issuance and trading—such as fractional investment—while the settlement systems required for real-world financial transactions and links to the existing financial market have received relatively little attention.
Experts said Korea needs to spell out settlement methods and expand use cases to traditional financial products such as bonds and funds to ensure the regime takes hold.
On the 12th, the Korea Capital Market Institute, the Korean Derivatives Association, and Koscom held a joint symposium titled "The Future of security token offerings (STOs)" at the Korea Financial Investment Association in Yeouido, Seoul. Participants discussed the role of digital settlement assets ahead of the STO regime's introduction, overseas tokenization cases, shortcomings in the domestic market infrastructure, and what needs to be fixed.
Im Byoung-hwa, a professor at Sungkyunkwan University who gave the first presentation, said debate on settlement methods has been insufficient ahead of the STO rollout.
"We are three months out from launching security token offerings (STOs), but there doesn't seem to be much readiness on what assets will actually be used for settlement," Im said. "Alongside preparing issuance and trading platforms, we need to start a full-fledged debate on what will be used to settle transaction funds."
He argued that won-denominated stablecoins and tokenized deposits should be used as complementary, not competing, settlement methods. Tokenized deposits allow existing bank deposits to be transacted on a Blockchain, while stablecoins are digital assets whose value is pegged to legal tender such as the won.
Im said, "If transactions are processed inside banks, tokenized deposits have the edge; outside banks—on external wallets or new platforms—stablecoins can be used. Having both settlement methods at the same time will create an environment that institutions, corporates, and individuals can all use."
To that end, he proposed building a multilayered infrastructure that connects final interbank settlement via Central Bank Digital Currency (CBDC), payment and clearing among financial institutions using tokenized deposits, and user payments using stablecoins.
He also cited interoperability—linking different Blockchains and settlement assets—as an urgent task. To cut costs that arise when redeeming stablecoins for won or linking them to bank accounts, he said Korea should establish shared redemption and liquidity management infrastructure.
Next, Jung Hwa-young, a research fellow at the Korea Capital Market Institute, said Korea's STO debate is skewed toward fractional investment. Because tokenization is spreading overseas around traditional financial products such as bonds and money market funds (MMFs), she argued that Korea should focus on the digital transition of existing financial products and market infrastructure.
"A stock is still a stock after tokenization, and a bond is still a bond," Jung said. "Existing financial products have established legal characteristics and regulatory frameworks, so applying tokenization technology involves relatively less uncertainty."
She pointed to collateral management, repurchase agreement (RP, repo) trading, fund operations, and bond issuance and settlement as areas where tokenization would be especially useful. Streamlining asset transfers and settlement that now pass through multiple financial institutions could lower transaction costs and improve capital efficiency.
By contrast, she said listed shares already trade and settle on relatively efficient systems, so additional benefits from tokenization remain unclear. She also said the market should distinguish between token products that track stock prices and tokenized stocks that confer actual shareholder rights.
Jung proposed broadening Korea's discussion beyond fractional investment to the digital transition of traditional products—stocks, bonds, and funds—and market infrastructure. In particular, she suggested starting with tokenized government bonds in pilot projects based on real transactions, then expanding to uses such as collateral management and RP trading.
"Tokenizing government bonds is well-suited for early pilots because major institutions—government, the Central Bank, and institutional investors—can participate broadly with clear roles," she said. "Based on empirical experience, we can gradually extend use cases to related operations such as secondary-market trading and collateral management."
She cautioned, however, that Korea should not overlook new risks inherent in tokenization technology in a rush to launch the regime. Beyond smart contract bugs and security threats, increasingly complex linkages in financial transactions could amplify leverage and the risk of contagion among financial institutions. Jung stressed moving step by step while clarifying regulations and testing actual benefits and risks.
From the securities industry, participants called for clear settlement methods and greater regulatory clarity.
Jung Yeon-mi, Director General of digital planning at NH Investment & Securities, said the firm is preparing a tokenized MMF as its first product and is joining Koscom's shared platform with the aim of launching when the regime begins in February next year.
"Securities may be tokenized, but cash settlement is still done the old way," Jung said. "If we settle the same way through existing accounts, it's only half a solution." She added that settlement systems using tokenized deposits, stablecoins, or CBDC should be developed in step with product development.
She also said unclear regulatory interpretations are causing confusion in the industry. On tokenizing institutional private MMFs, Jung explained that interpretations on issuance limits and other matters differ between asset managers and securities firms. "If interpretations are not clarified quickly, which managers can participate and how products are designed will change," she said, urging financial authorities to provide clear standards and expand opportunities for real-transaction pilots.
