Clarifying the Regulatory Stance: The "Security" Nature of Tokenized Stocks
South Korea's Ministry of Economy and Finance has recently signaled a pivotal shift in the regulatory approach towards tokenized assets. Officials emphasized that while tokenized stocks utilize digital technology in form, their core economic value and rights structure are fundamentally identical to traditional securities. Therefore, applying the substance-over-form principle, these assets should be regulated under the securities framework.
Legal Basis and Proposed Tax Timeline
The Financial Services Commission had laid the groundwork for this classification in earlier guidelines, explicitly defining "token securities" as securities issued in digital form and falling under the Capital Markets Act. Building on this, the Ministry stated that once the FSC formally confirms their status as securities, taxation can commence immediately under existing laws, with implementation possible as early as the second half of this year.
This position directly contradicts prevailing market expectations. Many participants had treated tokenized stocks as virtual assets, anticipating they would benefit from related tax exemptions until the new virtual asset tax law takes effect next year.
Global Reach of the Tax Net
The Korean authorities' tax vision extends beyond domestic borders. The Ministry stressed that the tax scope will include offshore transactions conducted on foreign platforms. The key criterion is the economic substance of the asset—regardless of its issuance location or trading platform, if its value and rights structure实质上 qualify as a security, it may become subject to Korean taxation, with relevant dividend income liable for taxes.
Enhancing International Tax Cooperation
To effectively enforce this cross-border taxation policy, the Ministry is actively establishing information exchange systems with overseas tax authorities, including the U.S. Internal Revenue Service (IRS). This move aims to enhance tax transparency and ensure oversight and taxation capability over relevant global transactions, marking a significant step towards international alignment in digital asset tax compliance.