Examining the white paper on the economy and platform of the newly issued “Token A,” Cha & Kwon Law Offices reviewed whether the token falls under a “financial investment product” or securities regulated by the Financial Investment Services and Capital Markets Act (“the Act”).

In assessing whether a token falls under a "financial investment product," it is necessary to determine the general definition of the financial instrument's motives for trading, transferability, contractual rights, attributes of investment, etc., as well as whether it falls under matters expressly excluded by law. In addition, in determining whether it may be categorized as securities, it is necessary to closely examine whether they may be included in each type of security, especially whether they fall under the most comprehensive “investment contract securities.” As the Securities and Futures Commission presented detailed guidelines on the criteria for recognition of investment contract securities in April this year, whether tokens will be recognized as securities has emerged as an important topic in the industry.

Whether the tokens to be issued are securities subject to the rules and regulations of the Act is an imperative matter that must be confirmed for the fate of the business. However, to do so, individual and professional judgment on the nature of each token, such as a utility or governance token, and on the detailed and practical role of the token is necessary.

Consult with Cha & Kwon Law Offices for legal advice with thorough knowledge and experience in the blockchain industry before initiating a virtual asset business.