Korean Institutions Onchain: RWA, Current Status and Next Steps

Transcript

Hello. I'm moderating the final session, from Wavebridge, a virtual asset provider — my name is Peter Chung. For this final session, we have three team heads from securities firms leading Korea's security token (STO) industry, and we'll hear candidly about the work each of them is doing on the ground at their firms. First, I'd like to ask each of you to introduce yourself and what you do at your company. Please tell us in turn what your team is mainly working on in RWA these days. Thank you.

Let's start with Joosik Lee. Hello. I'm Joosik Lee, and I lead the digital asset business at DB Securities. I've been sitting at the front table, and the reason I kept looking back is that sitting through all this can get quite boring and tiring, yet at this event, where we're the title sponsor, people we know and people we don't have all stayed this late and taken part so enthusiastically. So once again, I'd like to thank you all before I begin.

In Korea, as has been reported in the press, our team is working with the Busan city government on a project to tokenize financial lease receivables generated by carbon-reduction equipment. Overseas, we're reviewing a business with the Optimism Foundation, which was announced today. In fact, we invited everyone in our consortium here. The heads of the companies in the Busan consortium all came, government officials stopped by, and people interested in our Jeju project who will be working with us also came today, so for our company

this is a very meaningful event. Thank you. Hello. I'm Yoonyoung Choy, Head of Digital Asset Research, Hanwha Investment & Securities. My team covers the digital asset market as a whole and, given its move into the regulated system, mainly policy trends. On security tokens, we focus on how traditional finance and blockchain are converging, which is happening first at the global level, and how that can connect to Korea's security token framework.

Good evening. I'm Ryan Jang, head of the digital asset business division at Kyobo Securities. Nice to meet you. First, many thanks to the Ethereum Foundation for inviting me to this occasion. This is actually my first time on such a big stage. So I'm a bit nervous. I tend to talk a lot, but today I'll keep it short and stick to the key points — first, because you're all probably hungry, and second, my second child was born four days ago, and I need to get home to help with the baby. So I'll be brief.

Thank you. Thank you. Next, I'd like to ask each company one question. First, a question for Joosik Lee of DB Securities. DB Securities is running a two-track strategy: pursuing a regulated security token business at home while building an offshore B2B platform business abroad. In Korea in particular, rather than tokenizing standard securities, you began by structuring new rights and cash flows, like leases on ship emission-reduction gear. I'm curious why you looked for opportunities in this area first.

And could you explain in a bit more detail why you run separate domestic and overseas strategies? We didn't start out with a large team running this kind of business. We pursued extreme efficiency, and even with a small team we generated revenue from government-backed projects. I think this year we've shown that even a firm that isn't one of the majors can run a real business with local governments, and that this can be an opportunity for other small and mid-sized firms.

Next year, too, we plan to focus on projects with local governments. But to be clear, we didn't have all this in mind from the very beginning. With any strategy, if you start out trying to take on no risk at all, you can't do anything. We've moved step by step, and at each step the next one became visible, and then the one after that.

We started as a task force last November, and in near-record time were upgraded to a permanent team. We keep delivering results and moving forward. Many other securities firms have reached out to collaborate with us, so in a sense, I think we're heading in the right direction. Second, the overseas business has many unknowns, even for us, so we're getting very rigorous legal reviews, and we're in detailed discussions with the people involved in the development here.

If any of you here reach out to us later, it would be a big help. Thank you. Thank you for that. Next, a question for Yoonyoung Choy of Hanwha Investment & Securities. I'd like to ask about global cases. Overseas, within RWA, certain areas like tokenized Treasuries and MMFs have grown quickly, while other security tokens haven't yet taken hold as much as expected. What do you see as the factors that separated these two?

And among them, are there models that could apply to Korea's recently announced Phase 1, which covers institutional bonds and MMFs? Tokenized Treasuries drew attention first in the tokenization market partly because the product structure is relatively simple, and on top of that there was real utility — for example, use as collateral and extra benefits in settlement — which is why that sector's growth got so much attention.

As for other sectors, it's not that they lack growth potential. Rather, if, for legal or structural reasons, it stops at just recording transactions on the blockchain, then since the market is still very early, their growth potential has drawn relatively less attention. That's how I see it. In that sense, Korea's security token roadmap — Phase 1, and longer term even onchain settlement — is broadly in line with these global trends.

As for models where the usability can be anticipated, since Phase 1 is about verifying safety, for bonds and MMFs, the starting point would be safety verification — things like fund management and collateral transfers — and then, toward Phase 3, over the long term, onchain settlement using stablecoins. I think a model that takes this long-term path would be a good starting point.

I'd like to ask one more follow-up. You recently predicted that the time when brokerage apps and exchange apps both trade security tokens and virtual assets could come sooner than expected. In that process, what role do you think securities firms should play? Please share your view. The so-called super app trend you mentioned is already well out in front globally. For example, centralized exchanges like Coinbase and Kraken are targeting markets outside the US where rules already allow it, offering not just crypto trading but also tokenized securities and perpetual futures, all in one app.

Seen this way, if the super app race accelerates between companies coming from traditional markets and those that started in the crypto market, the line between the two markets could blur. That's my outlook. If so, securities firms can start from simply opening a tokenization platform and take on a larger role in extending the trust framework of existing capital markets onchain. That's our view.

For example, delivering onchain assets as investable financial products, and going beyond just issuing and trading tokens to manage the post-trade stage and connect traditional financial market infrastructure with onchain systems. We expect securities firms can play a key role there. Thank you. Next, a question for Ryan Jang of Kyobo Securities. While preparing for Korea's framework, Kyobo has also run an experiment where foreign investors buy Korean stocks with dollar stablecoins, with settlement handled onchain.

Could you share what this experiment means for Kyobo's strategy? And running this PoC, what did you find needs to be sorted out to make this structure work within Korea's regulatory framework? The project we launched this time was actually not a tokenization project. What we set out to do was, within limited regulatory bounds, and while keeping existing traditional financial infrastructure as it is, to find how foreign investors, and crypto investors, could invest in Korean stocks

more efficiently. That was our thinking. There were several reasons we started this project, but from a foreign investor's point of view, you first have to open an account, then exchange currency, and then transfer funds. We saw these as points of friction, and we discussed how to make this more efficient with Wavebridge, who is here today, SBI, and Ripple.

The PoC is almost complete, but I think we're still some way from commercialization. To do this within the regulated system, there are a few things we need to confirm. First, what is the legal nature of a stablecoin? And which institutions will be allowed to handle stablecoins? In the US, the GENIUS Act has already taken effect, so I'd like to see a similar, more concrete law here in Korea too.

There are also regulatory points to confirm around foreign exchange reporting, anti-money laundering, and custody. And if an incident occurs, we need to clearly define who is liable. That needs more work. We'll work through these issues and do our best to commercialize it as soon as possible. Thank you. Let's wrap up with one common question for everyone.

Recently, the Korea Securities Depository — a hot topic in the industry — set a standard that each security is handled on a single ledger only, and its guidelines assume that distributed ledgers will be private chains. Do you see this as a stable starting point that speeds up institutional entry in phase one, or as a constraint that will delay connecting to global liquidity? Please speak freely from a practitioner's view. Let's start with Joosik Lee.

This is an Ethereum event, but I have to give the by-the-book answer. As a financial institution, I can't help but say that, to a degree, complying with domestic rules on a private network is the right thing to do. That said, the principle of managing one security on one ledger and the ideal of governing things on public chains are seen as such polar opposites that as we expand beyond tokenizing standard securities, there may be a concern that risks will remain even as time goes on.

Domestically, we make full use of Koscom and the Korea Securities Depository (KSD). For the overseas business with Optimism, which we're still reviewing, we intend to follow those standards. But this push to control everything through a single ledger has actually eased a lot compared to the days of fractional investment. Things are gradually loosening in practice. I've been in this industry for four to five years now, and as someone doing the work directly, I do feel it's easing considerably.

However, overseas, the volume and number of RWA issuances are growing so explosively that one could say Korea is a bit slow in keeping up. That may be true, but I think this new guidance, compared to earlier guidance, gives us some answers for resolving the issues around the KSD going forward. My hope is to bring platforms used overseas into Korea, so that institutional investors from there also come in, and to run an STO business in a structure where capital circulates.

That's the dream. But narrowing that gap will probably need more review. That's my sense. In fact, once we get legal reviews and actually do it, there's more that differs from the ideal than you'd think. There are personal data issues, and on our legacy ledger we need to segregate it from existing customers. So in practice, there are quite a lot of constraints. As these are gradually resolved, I think we'll eventually move toward adopting public blockchains.

That's my view. I very much agree with Mr. Lee, and since he's already said it well, I'll just add briefly. I fully understand the intent to check safety verification in Phase 1. Safety verification is needed when the market first opens, but I wouldn't say we should stop there, or that this is the final destination. Because when it comes to judging permissionless versus permissioned networks, the approach overseas isn't to treat them differently across the board based on whether they're permissioned, but to assess each network by its risks and functions. If a market stays confined to a single ledger,

that could affect its liquidity and competitiveness down the road. Considering interoperability and the like, even if not right away, I believe use of public blockchains should be opened up step by step over the long term. I agree with both of them. It may sound a bit like a matter of principle, but managing one security on one ledger can be a good starting point at the outset.

And if I think back on why this structure came about, it's because there are no clear rules on who owns the ledger, who runs it, and who is liable when something goes wrong. So having one authoritative institution oversee, control, and manage one security on one ledger is meaningful for launching the market stably. However, as each ledger operates separately and independently, we need to keep them from becoming siloed and isolated and having that become entrenched.

As was mentioned, interoperability, including with overseas markets, is blockchain's core mission and spirit. To preserve that as much as possible, through common data standards and standardized APIs, and by making liability clear when incidents happen — if those areas are addressed, if they're put in place, then in the long run I think we can fill the gaps in today's standards.

Thank you so much. Once again, thank you to our three panelists for their insights today. That concludes our final session. Please give them a big round of applause. Thank you.