[Edaily Marketin Won Jae-yeon Reporter] The domestic security token (STO) market is encountering regulatory gaps at the actual fundraising stage, despite having confirmed demand from overseas investors. This is because, although legislation for security tokens is underway, the infrastructure for issuance, distribution, and settlement has not yet been fully established.

In particular, critics point out that unclear standards regarding stablecoin settlements—which are preferred by foreign investors—and the domestic distribution of products issued overseas are creating limitations on raising investment funds or expanding to domestic investors, even after products have been developed.

According to the virtual asset industry on the 9th, the Financial Services Commission (FSC) is reviewing standards for the domestic distribution of overseas-issued tokenized securities, on-chain settlements, and fractional investment offerings ahead of the announcement of sub-regulations and guidelines for tokenized securities this month. Previously, in May, the FSC discussed the need to establish a phased roadmap for the tokenization of traditional securities—such as stocks, bonds, and money market funds (MMFs)—and for on-chain settlements at a public-private joint tokenized securities consultative body. The industry is closely watching to see to what extent these guidelines will address the influx of foreign investors and establish standards for payment and settlement.

This is why domestic operators are first examining overseas issuance structures. Since the tokenized securities system has not yet been fully implemented in Korea, it is difficult to design all aspects—including product issuance, distribution, and investment payment methods—entirely within the country. Consequently, some operators have been attempting to first issue products through overseas subsidiaries or licensed platforms abroad and sell them to institutional investors overseas.

Major financial institutions have also begun exploring connections with overseas infrastructure. Previously, Shinhan Investment Securities announced a collaboration with global RWA firm Etherfuse on an RWA backed by South Korean government bonds. Etherfuse is issuing stable bonds backed by South Korean government bonds, while Shinhan Investment Securities is acting not as an issuer or seller but as a government bond broker, providing support for the acquisition and management of the underlying assets.

Kyobo Life Insurance also formed a K-pop STO consortium with the entertainment company Day One Dream (formerly DOD) and issued CNCRT, a tokenized product backed by revenue rights from K-pop performances and concerts. Day One Dream’s tokenized debt securities were issued and sold in accordance with U.S. Securities Act regulations governing offshore offerings and were fully redeemed upon maturity in May of this year.

However, simply issuing securities overseas does not mean all domestic regulations can be avoided. While private placements targeting overseas institutional investors are permitted, the moment a product is offered to domestic retail investors or distributed on a domestic platform, public offering and sales regulations under the Capital Markets Act may apply. Depending on whether the target audience for the offering includes 50 or more persons, or whether there is a likelihood of transfer to multiple parties within one year of issuance, requirements such as a securities registration statement, a prospectus, and restrictions on resale may apply.

Settlement is another hurdle. While subscription and redemption structures utilizing dollar-pegged stablecoins are becoming widespread in overseas RWA markets, standards regarding accounting treatment, foreign exchange reporting, anti-money laundering (AML), and taxation are unclear in Korea when such stablecoins are received as investment funds for tokenized securities. It must also be clarified whether investment payments and profit distributions should be treated as Korean won, foreign currency, or virtual assets, and who bears the responsibility for investor verification and providing proof of remittance.

These issues were also evident in the earlier Day One Dream case. Some overseas investors participating in CNCRT hoped to invest using dollar-pegged stablecoins, but Day One Dream determined that there were no clear institutions or standards in Korea for accounting for and processing such funds. Ultimately, the actual transactions were conducted in USD fiat currency rather than stablecoins. In essence, while there was demand from overseas investors, there was no infrastructure in Korea to accept and process these funds.

The industry views this not as a problem specific to individual companies but as a bottleneck affecting the domestic STO market as a whole. While it is possible to issue tokenized securities overseas based on domestic assets, there is concern that if the regulatory framework fails to keep pace during the stages of recruiting domestic investors and handling payment and settlement, control over issuance and distribution could increasingly shift to overseas infrastructure. In particular, for fractional investment or non-standard revenue-sharing products, standards must be established for the valuation of underlying assets, disclosure of investment risks, and verification of profit distribution.

Consequently, the industry is closely watching whether the subsidiary regulations to be released this month will address these issues. If standards for the domestic distribution of overseas-issued STOs, non-resident investments, stablecoin payments, and on-chain settlement are not established together, a structure could solidify in which products based on domestic assets are issued overseas and sold exclusively to foreign investors.

A virtual asset industry official stated, “The goal is not to block overseas issuance per se, but to ensure that standards for receiving investment funds, settlement, and the protection of domestic investors are established when domestic assets are tokenized.” The official added, “While issuance overseas has become possible, if the standards for settlement and distribution remain unaddressed, it will be difficult to connect to the domestic market even after confirming overseas investment demand.”