[Created using ChatGPT]
[Created using ChatGPT]

When SK Hynix shares tumbled, tokenized stocks linked to the chipmaker fell in lockstep — dropping more than 15% across global digital asset platforms that trade around the clock. The decline showed how tokenized stocks, which continue trading even after domestic markets close, can reflect an underlying stock's slide in real time.

According to CoinMarketCap data as of around 4:25 p.m. Tuesday, three SK Hynix-linked tokenized stock products — SKHYx, SKHYon and SKHYB, issued respectively by xStocks, Ondo and bStocks — had each fallen between 15.55 percent and 15.87 percent over the preceding 24 hours.

On the same day, SK Hynix closed down 14.65 percent on the Kospi at 1.55 million won ($1,060). Selling pressure concentrated in semiconductor shares sent the Kospi sharply lower, and a circuit breaker halted all stock trading for 20 minutes during the morning session.

SK Hynix's American depositary receipt also closed down 7.47 percent at $143 on Monday (local time) in the United States. The tech-stock weakness that began in American markets had rippled through to the domestic spot market and the on-chain tokenized market in succession.

The products issued by all three providers are collateral-backed tokenized stocks: actual shares or ADRs are held in custody, and corresponding tokens are issued on a blockchain. Investors can buy and sell the tokenized stocks on digital asset platforms that operate 24 hours a day, rather than through conventional brokerage accounts. Because token holders are not registered directly as shareholders of the underlying stock, they face restrictions on exercising shareholder rights such as voting.

The securities industry has been paying growing attention to the price-discovery role of tokenized stocks. Yang Hyeon-gyeong, a researcher at iM Securities, wrote in a report Tuesday that tokenized stocks "are functioning as a price-discovery market that first reflects information generated overnight and on weekends." Movements in US semiconductor shares, memory chip industry conditions, exchange rates and company-related news can all feed into token prices while Korean markets are closed — potentially influencing the opening price and early investor sentiment on the next trading day.

There are also forecasts that as the tokenized market grows, its influence on supply and demand in the domestic stock market could increase. A rise in net issuance of tokenized stocks would drive more purchases of the underlying shares, and prices formed in overseas token markets could feed back into the domestic spot market. Hwang Seok-jin, a professor at Dongguk University's Graduate School of International Information Security, said there is "a real possibility that some of the asset liquidity and price-discovery function could become absorbed into overseas tokenized markets," adding that "the gap between domestic and foreign markets could widen as a result."

Global platforms are moving to expand their offerings tied to Korean equities even as domestic regulators are still in the review stage. Financial authorities plan to release revised subordinate regulations and guidelines on security token offerings this month. The market broadly expects that permitting the tokenization of standardized securities — including stocks, bonds and money market funds — all at once alongside fractional investment products and investment contract securities will be difficult.

The Financial Services Commission held the second meeting of its public-private STO consultative body in May and agreed to draw up a phased road map for tokenizing standardized securities and enabling on-chain settlement. The plan calls for a sequential rollout following testing and system improvements to minimize conflicts with existing regulations and infrastructure.

While the legal groundwork for tokenizing listed shares has been laid, additional regulatory work is needed before actual implementation. Listed shares in Korea are issued and distributed through an electronic registration system centered on the Korea Securities Depository. Issuing and trading listed shares on a blockchain would require clarifying not only rights relationships and issuance and distribution methods, but also how the system would link to the depository's ledger.

In the meantime, global operators are pushing ahead with products based on Korean equities. xStocks announced Wednesday (local time) that it would add Korean-listed shares as new tokenization targets. One digital asset industry expert warned that "if tokenized products based on domestic stocks can only be traded overseas for one or two years, the competitiveness of Korea's securities market could weaken," and called on authorities to "design policy so that related products can be handled within the regulatory framework domestically."

However, even if the tokenization of standardized securities is permitted in Korea, the structure is likely to differ from overseas products. Domestically, a "digital twin" approach — linking existing electronic securities to blockchain tokens on a one-to-one basis — is expected to be applied first. Under this model, shares remain in electronic securities form while corresponding tokens are issued against them, keeping shareholder rights and investor protections within the regulatory framework.

Global markets, by contrast, trade not only collateral-backed tokenized stocks but also perpetual futures-style products that settle only the price movement of the underlying share. Perpetual futures are derivatives with no expiry date, and products that track SK Hynix's share price at up to 20 times leverage are already available. The market is seeing demand both for arbitrage between tokenized stock prices and underlying share prices, and for high-risk leveraged bets on share price moves using perpetual futures.

One financial investment industry official said that "domestic products are regulated products subject to anti-money laundering and know-your-customer standards, whereas some overseas products serve different purposes and investor bases." The official added that while allowing the tokenization of standardized securities domestically "could draw back some of the demand that has gone offshore, it would be difficult to absorb all investors who use offshore platforms purely for arbitrage."


kyoung@heraldcorp.com