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[Delio] South Korea issues guidelines on crypto as securities. New crisis or a new opportunity for the investment industry? | Exclusive Korean crypto market insights

On February 6, South Korea announced guidelines outlining which specific cryptocurrencies will be subject to the same rules as financial instruments.

What is STO?

The background of Security Token Offering

In 2017, the demand for participation in Initial Coin Offerings (ICOs)* increased prices leading prices for cryptocurrency to skyrocket. In an unregulated environment, Ponzi schemes (a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors) proliferated among investors, and many projects were riddled with red flags, leaving investors unprotected and victimized. A new alternative for raising funds while avoiding harm was the Security Token Offering (STO), which raises funds through security tokens.

Source: STOScope

The rise of the securities tokens offering in South Korea

In light of the current market state, it is anticipated that security token offerings will bind the traditional financial and cryptocurrency industry, paving the way for revolutionary advancements in investing options generally.

Source: FSC

Interesting to know!

For easy understanding, FSC draws a parallel between the securities concept and the securities issuance form comparing the first one to the “food” and the second one to the “bowl” that holds the food. Below we summarize the 3 key points.

  1. The food does not change no matter what kind of bowl it is served in. In other words, the essence of security does not change by changing the form of issuance.
  2. Anything can be used as a bowl to hold food, meaning that certain legal effects are required to protect investors.
  3. Different types of food may require different bowl sizes and shapes. In particular, in the case of small-scale issuance of atypical securities, existing electronic securities that are centrally registered and managed electronically through securities companies are not suitable, and new issuance forms are required.

Security tokens guidelines summary

Source: FSC

South Korea Token Securities Market Status

The token securities regulation announced in Korea is expected to be regulated in a way that does not deviate significantly from the laws and regulations of major overseas countries.

New crisis or a new opportunity?

Once we’ve covered the security tokens guidelines “shell”, let’s take a step back and see the actual pros and cons of the STO guideline. We will start with the pros.


1. As token securities enter the system, it is expected to become a safer market from an investor protection standpoint.
2. It is expected that it will be easier to invest in real estate (buildings), which have high barriers to entry such as artworks, from cryptocurrencies that have lost credibility due to recent exchange problems and the WEEMIX meltdown, to real estate (buildings) with large funds and heavy cash flows and poor exchange rates (Token Issuance Diversification).


1. If there is a possibility of being issued and traded in the form of digital assets and recognized as securities (ex. Ripple, etc.), investment value and autonomy may decrease due to regulatory use.
2. Due to the real asset-based nature, security tokens can be valued and may not be volatile.
3. In theory, all real assets can be issued as security tokens, but only assets that can be regulated as they enter the system can be issued as tokens (there are more restrictions on who can issue tokens than when they are classified as digital assets).

Bottom line

Considering everything mentioned above, rather than controlling and restricting the blockchain industry by regulating the virtual asset market and virtual asset operators, we believe that using regulation as an opportunity to support and provide guidelines to help them settle into the existing financial market will be a way to protect investors and increase the competitiveness of the domestic financial market.

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Delio is a certified crypto bank for digital asset management. Established in 2018, the company has acquired business licenses: Money Services Business (MSB) license in the US, and Virtual Asset Service Provider (VASP) license in Korea.

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Delio Digital Asset Finance Group, established in 2018, is №1 fintech company based in Seoul and acquired digital asset licenses from Korean and US governments.