BlackRock, the world's largest asset management firm, introduced an investment product called 'BUIDL' in March 2024. This fund invests in U.S. Treasury securities but differs from traditional funds as it is a tokenized fund based on blockchain technology. In simple terms, the investment capital in the fund is stored as a 'digital coupon' in the form of tokens on the blockchain. The advantages are numerous. Unlike traditional funds, which require complex procedures through brokerage firms during business hours for trading and settlement, BUIDL allows investors to withdraw or transfer their funds in real-time, 24/7.
The era of token securities (STO) is set to begin next year. STO has been known for its concept of fractional investment, allowing small investments in rights related to real estate or music. However, experts believe that STO represents an innovative change that could transform digital finance as a whole. How will the financial landscape change with the advent of the STO era, and how much more convenient will it become?
According to the Financial Services Commission and the financial investment industry, the revised Electronic Securities Act and Capital Markets Act, which establish a legal framework for the issuance and distribution of token securities, will take effect on February 4, 2027. Token securities record rights related to securities on a blockchain-based distributed ledger. Participating institutions, including brokerage firms and the Korea Securities Depository, will jointly manage the issuance, holding, and trading information of these securities.
The key point is that distributed ledgers can be used as a legal record for securities rights. Currently, bonds can be issued and transferred through electronic systems. However, even if ownership records are maintained on a separate blockchain ledger, these records do not currently recognize changes in rights under the Electronic Securities Act. The upcoming legislation will legally acknowledge these records.
For example, when a customer of Brokerage Firm A transfers a bond to a customer of Brokerage Firm B, the current process involves linking electronic systems to change ownership records and verify the results. With the token method, participating institutions can design their operations based on the same information recorded in a shared ledger, reducing the need for institutions to exchange information or verify consistency.
Along with the institutionalization of token securities, regulations on bundling underlying assets will also be relaxed. As a result, a wider variety of fractional investment products that can be issued in token form are expected. For instance, instead of a product tied to the revenue rights of a single music track, products bundling the revenue rights of multiple tracks can be designed. Assets that were previously too small to be commercialized can now be aggregated for investment purposes.
The STO-related laws set to take effect next year represent the first phase. In subsequent phases, regulations regarding payment for transaction amounts and market operations will be established. This is expected to bring significant changes across the financial market.
A notable change will be in payment methods. Currently, the settlement and clearing of stock transaction amounts involve complex electronic registration and record-keeping processes through brokerage firms, exchanges, and depositories. However, in the STO era, real-time settlements will be possible, making the process of buying and selling securities and receiving transaction amounts much more convenient for investors.
The institutionalization of STO is also expected to provide more flexible options for reselling fractional investment securities. For example, an investor in revenue securities from a building rental can find a buyer on an over-the-counter exchange without waiting for the building to be sold if they need funds.
In the long term, this could enhance access to investments in overseas unlisted securities. An industry insider noted, "We can envision services where domestic investors can access securities related to unlisted artificial intelligence (AI) companies in the U.S. through domestic platforms."
The key will be refining the roadmap. The specific timelines for implementing phases two and three and the establishment of concrete payment infrastructure have yet to be determined. For general investors to feel the changes, the launch of various products, the activation of distribution markets, and the establishment of payment infrastructure must follow. A financial investment industry representative stated, "The stability and efficiency of the initial system, market demand, technological advancements, and related legislation will be variables to consider."
* This article has been translated by AI.
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