South Korean Startups Push Back on Token Securities Guidelines; SMEs Ministry Poised to Pressure FSC

As Lee So-young, nominee for Minister of SMEs and Startups, signaled openness to a public debate with South Korea's Financial Services Commission (FSC) over regulations constraining startups, the Ministry of SMEs and Startups fired a policy intervention signal by directly hearing the voices of startups that have entered the token securities market. A common industry complaint is that the FSC's recently announced token securities policy direction was designed around large financial institutions.

On the 16th, the Ministry of SMEs and Startups held a meeting in Seoul with the Korea Blockchain Industry Promotion Association, Korea Digital Asset (KODA), Baerae, Kaia DLT Foundation, and EQBR to gather opinions on token securities market trends and startup support measures. At the meeting, industry participants went through the key provisions of the "Token Securities Policy Direction" announced by the FSC on the 4th, point by point, demanding revisions.

The biggest point of contention is the "ban on inter-ledger transfers" included in the distributed ledger standard requirements guidelines. The provision, which requires a single security to be managed on only one distributed ledger, has drawn criticism that it could fundamentally block the adoption of interoperability technology connecting different ledgers. The Korea Blockchain Industry Promotion Association stated in a recent opinion submitted to the National Assembly's Political Affairs Committee that this provision risks undermining technology neutrality.

Another stumbling block is the 4 billion won (approximately $2.9 million) equity capital requirement. Non-financial company issuers that wish to directly open and manage customer accounts for self-issued token securities must hold this level of capital—a barrier criticized for blocking technologically capable but capital-constrained new specialized firms from entering the registration management market.

Industry officials attending the meeting requested that the following be reflected in the enforcement decree revision process: △ conditional use of public blockchains that meet risk control requirements △ allowance of interoperability, including multi-chain issuance within controlled scope △ creation of pathways for technology startups to participate as technology operation or delegated operation partners in projects centered on large financial institutions.

One industry official said, "The purpose of using blockchain and tokenization is for our companies to expand globally and for foreign capital to flow into South Korea. The FSC may prefer closed systems for financial stability, but it should actively consider adopting expansive public distributed ledgers by referencing global cases such as the United States, which uses public distributed ledgers."

Another official proposed introducing a small license system that applies different regulatory intensity based on asset size. EQBR's Chief Marketing Officer Lee Min-ki said, "Support is needed so that companies that received innovative financial services (regulatory sandbox) designation can transition to actual business," and requested, "We hope the Ministry of SMEs and Startups will look into ensuring that the industry receives smooth responses to regulatory inquiries submitted to financial authorities."

Legal experts also pointed out fundamental limitations in the institutional design. Attorney Lee Seung-jun, who attended the meeting, emphasized, "The current Electronic Securities Act remains at the level of recognizing the electronic registration account book that publicly discloses rights as a distributed ledger, making it structurally difficult to accommodate what the industry has been requesting through the FSC's token securities policy direction and subordinate regulations alone. To move toward public blockchains, the account book structure itself must be applied to the blockchain, and for this, additional amendments to the Electronic Securities Act must be discussed together."

Attorney Kim Dong-hwan of DLG Law Firm said immediately after the meeting, "If the ban on inter-ledger transfers and the 4 billion won equity capital requirement are maintained as-is, it will be difficult for startups to provide innovative services in token securities. We hope the Ministry of SMEs and Startups will open a path for startups to continue operating their businesses or pursue technology development."

Kim Seong-gon, director of the Korea Blockchain Industry Promotion Association, said, "If things continue this way, even if the token securities market opens, there won't be much room for startups to participate. We attended the meeting to raise the need for supplementation at the association level. Since minister nominee Lee So-young has expressed commitment to startup regulatory reform, we hope for regular communication with the startup industry going forward."

A Ministry of SMEs and Startups official said in a phone call regarding the meeting, "We listened to the opinions and difficulties of the startup industry from the perspective of fostering new industry technology entrepreneurship. We will be in touch once specific policy measures are determined."