Token Securities Focused Only on Busan... October Exchange Opening Seems Difficult

Authorities' High Sandbox Threshold
Frustrates RWA Projects
Gaining Attention as Small-Scale Fundraising Channel

The opening of the Busan Digital Asset Exchange, initially expected to launch by mid-October, has been postponed to later this year. Domestic real-world asset (RWA) projects, which have been eagerly awaiting the exchange as a funding channel, are now solely focused on the exchange’s schedule.

According to the token securities (ST) and virtual asset industries on the 27th, the Busan Digital Asset Exchange originally aimed to open by mid-October, but due to some delays in system development, the launch has been pushed back to within the year. However, the exchange’s inauguration ceremony will proceed as planned in line with the opening of the 'Blockchain Week in Busan (BWB 2024)' on the 28th of next month. A detailed implementation plan will also be unveiled on that day.

RWA refers to assets tokenized using blockchain technology, such as real estate, artworks, and bonds. Recently, domestic companies have been increasing their entry into the RWA business following global investment banks (IBs). Moreover, the fact that there are no restrictions on tokenizing currencies, carbon credits, intellectual property (IP), and other assets is considered an advantage.

Currently, RWA projects in Korea that have not found suitable funding channels are waiting solely for the exchange’s launch. Although the Financial Services Commission’s innovative financial service, the 'Financial Regulatory Sandbox,' exists, the likelihood of passing through the token securities issuance (STO) method is slim. In fact, over the past two years, the only entity designated under the financial regulatory sandbox in the ST industry is the aviation consortium involving Galaxia Moneytree, Shinhan Investment Corp., and Eugene Investment & Securities, which received approval at the end of April.

This situation is also affecting the Korea Exchange’s 'KRX New Securities Market,' which has been prepared as a 'token securities on-exchange market.' The Korea Exchange began preparations for the KRX New Securities Market after receiving sandbox approval from the Financial Services Commission at the end of last year, but the possibility of launching within this year remains uncertain. This is mainly because only a few ST operators have passed the financial sandbox, resulting in limited listing demand. The exchange is currently in contact with the industry to gauge demand, but the outlook remains challenging. High entry barriers known in the market, such as 'minimum capital of 2 billion KRW and listing amount of 3 billion KRW,' are also cited as factors deterring companies.

The Busan Digital Asset Exchange plans to expand its trading support targets from product areas free from regulation to STs in the future. However, product groups requiring securities registration and approval, such as STs, must obtain approval from financial authorities, meaning the same regulations apply.

A venture capital (VC) representative said, "Since there are almost no cases of passing the financial sandbox, there is great anticipation at the project level for it to serve as a funding channel," adding, "We expect demand to concentrate mainly on companies urgently needing to raise small amounts around 200 to 300 million KRW on the exchange."