Korea's Mirae Asset, SK Telecom tie up for security token ecosystem

Mirae Asset Securities Co. and SK Telecom Co., South Korea’s top brokerage house and mobile carrier, are set to join hands to establish an ecosystem for security tokens (STs), a digital form of assets such as stocks, bonds and real estate, as they seek future growth engines.

Mirae Asset and SK Telecom plan to sign a deal on March 30 to set up a consultative body called Next Finance Initiative, according to local information and communications technology (ICT) industry sources on Tuesday. The two companies are seeking other partners for the consultative body while discovering smaller companies that want to offer STs. The brokerage and the mobile carrier are known to consider the ST business in overseas markets.

Mirae Asset is reportedly poised to discover underlying assets for the issuance of STs, while SK Telecom will establish infrastructure such as blockchains, the sources said.

An ST is a digital asset that represents ownership or other rights and transfers value from an asset or bundle of assets to a token. The asset is based on a distributed ledger, a database that is consensually shared and synchronized across multiple sites, institutions, or geographies, and accessible by multiple people.

The Financial Services Commission last month unveiled measures to improve regulations on the issuance and trade of STs with an aim to allow all kinds of fractional investments next year through the legalization of the tokens.

The regulator is scheduled to submit amendments to the Electronic Securities Act and the Capital Markets Act in the first half to lawmakers. Once the revisions are approved by the parliament this year, the issuance and trade of STs will be allowed in 2024.

SECURITIES FIRMS AIM TO CAPTURE RAPID GROWTH

The local ST market capitalization was forecast to soar by more than 10 times to 367 trillion won ($282.5 billion), 14.5% of the country’s gross domestic product (GDP), by 2030 from an expected 34 trillion won next year, according to a research institute of Hana Financial Group.

The ST market is predicted to attract investors with convenient trading at a low cost.

Investors can trade STs at Korea Exchange’s digital stock market and various platforms created by over-the-counter market operators. The costs for ST issuances were estimated about 40% lower than those of the sales of existing securities, according to the Hana institute.

The tokens are expected to gain more popularity as they securitize most assets, not only traditional ones such as stocks but also intangible ones such as copyright and intellectual property rights.

Musicow Inc., the country’s first music copyright trading platform, is working on services for fractional investments, but they are not classified as ST service providers as they do not use distributed ledger technology.

“The introduction of STs will make fractional investments easier and safer,” said a local brokerage industry source.

Mirae Asset’s smaller domestic rivals already formed alliances with others to capture the ST market.

Korea Investment & Securities Co. joined forces with KakaoBank Corp. and Kakao Entertainment Corp., units of the country’s mobile giant Kakao Corp. SK Securities Co. and Eugene Investment & Securities Co. signed a deal with a marine asset exchange for an ST business linked to such assets.

KB Securities Co. tied up with HIKIVE, an ST platform operator, SeoulAuction Blue Co., a unit of the country’s top art auction house Seoul Auction Co., Funderful, a platform for investment in K-content, and Stockeeper, a meat startup.

NH Investment & Securities Co. teamed up with Together Art, an art fractional investment company, Treasurer, a luxury goods fractional investment firm, and Greenery, a carbon-neutral solution provider. Kiwoom Securities Co. is cooperating with fractional investment companies such as Musicow, Kasa and Funble.

KT, LG UPLUS TO FOLLOW

SK Telecom aims to develop the ST business as a future growth engine as the sector is expected to rapidly grow while securing technology and establishing infrastructure for Web 3.0, an idea for a new iteration of the World Wide Web, which incorporates concepts such as decentralization, blockchain technologies and token-based economics.

“We will focus on exploring possibilities in the promising ICT sectors such as NFT, Web 3.0 and blockchain rather than planning to immediately securitize specific assets,” said an SK Telecom official. “We are set to leave the door open to various business models and look at them.”

SK Telecom is likely to use its own assets such as its metaverse platform ifland for the business later, telecommunication industry sources said.

Its smaller competitors in the mobile sector such as KT Corp. and LG Uplus Corp. are reportedly in talks with other brokerage houses to form similar consultative bodies for the ST business. Securities firms need those ICT companies as the STs are issued through a distributed ledger technology such as a blockchain.

“It is key for the ST business to stably connect multiple partners with clients of brokerage houses, so ICT companies’ roles are important,” said Baek Man-yong, CEO of INF Consulting, which specializes in ST issuances.

Write to Tae-Hoon Lee and Sang-Eun Lee at beje@hankyung.com
 
Jongwoo Cheon edited this article.