Opening STO Market... Opportunity for Securities Firms to Diversify Revenue Structures?

Mirae Asset Securities to Launch STO Platform Within the Year
Securities Firm to Provide Issuance Management and Distribution Platform
"Immediate Profits Limited Compared to Investment Costs," Skepticism Remains

[Asia Economy Reporter Minji Lee] As the Financial Services Commission allows the issuance and circulation of token securities under the Capital Markets Act, securities firms are stepping up their efforts. There is fierce competition to capture the market, as it is possible to absorb investment demand for new assets such as real estate, artworks, and music rights, in addition to traditional securities assets like stocks and bonds, thereby establishing new revenue models.

According to the investment industry, Mirae Asset Securities plans to launch an STO (Security Token Offering) platform within this year in line with the allowance of token securities issuance. To this end, it has signed a memorandum of understanding (MOU) with a domestic real estate trust company specializing in issuing Digital Asset-Backed Securities (DABS) and is also building a system to provide token securities services based on trust beneficiary certificates. This real estate trust company was the first in Korea to issue DABS and recorded a yield of up to 15%. In addition to real estate beneficiary certificates, it is also focusing on building infrastructure related to investment contract securities that allow fractional ownership (fragmented investment) of various assets.

Mirae Asset Securities formed a dedicated Digital Asset Task Force (TF) for the token securities business in January last year, the first in the industry, and has been focusing on infrastructure development. A Mirae Asset Securities official said, “We have focused on commercialization by paying attention to the innovation of the token business, and we will provide investors with new investment experiences by applying it to various financial products.”

According to the token securities guidelines recently announced by the Financial Services Commission, securities firms are expected to actively engage in account management for token securities issuance and provide circulation platforms. They can offer circulation platforms for various surrounding assets in token form (such as Korean beef, music rights, buildings) besides stocks, bonds, and derivative-linked securities, and also participate in issuance. This diversification of products opens a path for securities firms to diversify their revenue structures.

In fact, helping issue token securities and operating circulation platforms does not generate enormous profits for securities firms. The meaningful revenue mainly comes from trading commissions. If competition among securities firms’ platforms intensifies, even this may not be easy. What securities firms expect is to attract customers to their platforms and increase their influence in the retail market.

For this reason, small and medium-sized securities firms, which have relatively weak retail customer bases, are also eager to enter the STO market. The success or failure of the business may depend on how many investors they can attract in the early market. A representative of a mid-sized securities firm said, “Considering the number and volume of transactions in the virtual asset market, it is a market worth entering. Although it is uncertain how much profit can be generated, we believe we can solidify our retail customer base based on the STO platform.”

Kiwoom Securities’ Recognition, Hanwha Securities’ Blockchain Investment in Spotlight

Securities experts are paying attention to Kiwoom Securities and Hanwha Investment & Securities. Kiwoom Securities’ strength lies in the recognition of its existing Mobile Trading System (MTS). Since the initial market has limited product differentiation, the more attractive the platform, the easier it is to secure customers. Hanwha Investment & Securities’ advantage is that it has invested in shares of multiple blockchain startups and built collaborative relationships. This may make product discovery easier compared to other securities firms. Yoon Yudong, a researcher at NH Investment & Securities, explained, “Currently, the primary products of interest are real estate and unlisted stocks, and the company has already secured related firms. The strategy is to gradually increase the number of platform users by selling products that appeal to individual investors.”

Some securities firm officials view the STO business skeptically. They say that the government’s guidelines on the token securities business are unclear, and only the securities firms’ clocks are ticking fast. A representative of a large securities firm said, “It will cost more than 10 billion KRW to build the infrastructure from a revenue model perspective, but the profits the company can gain at this point are not significant. While it is positive that a new market is opening, since the government’s guidelines have not been clearly presented, we need to watch the situation a bit longer.”