People pass by ATMs of major banks in Seoul, Oct. 20. Yonhap

Major banks are accelerating their preparations to enter the tokenized securities market, as the reintroduction of a bill at the National Assembly to institutionalize security token offering (STO) is raising expectations for the market once again.

Rep. Kim Jae-sub of the ruling People Power Party submitted the bill on Friday, aiming to establish the legal foundation for security tokens and draw up measures for investor protection.

"The institutionalization of STO reflects the demand in the market for securities issuance utilizing distributed ledgers and will serve as a catalyst for the emergence of new and diverse forms of securities in the future," Kim said.

A similar bill was introduced in July of last year during the 21st National Assembly but ultimately, it was unsuccessful.

Security tokens are investment assets utilizing distributed ledger technology. They allow assets, such as real estate and artworks, to be divided into smaller units, linked to blockchain-based tokens and traded on the market.

Unlike typical cryptocurrencies like Bitcoin, security tokens have the characteristics of traditional securities and are, therefore, subject to regulation under the Capital Market Act.

According to industry officials, Tuesday, NH NongHyup Bank recently completed the development of a security token issuance platform and is conducting tests with the goal of launching it as early as the end of next month.

Since being selected by the Ministry of Science and ICT in June as a blockchain dissemination project operator, the bank has been the fastest among rivals in preparing to enter the token securities market.

Once the platform is launched, fractional investment companies, among others, will issue security tokens, while the bank will handle account management, data storage and transaction verification.

"We aim to enhance the platform's functionality through testing with various fractional investment operators, bringing it to a level readiness for immediate commercialization," a bank official said.

Shinhan Bank is approaching the market as a facilitator rather than taking the lead in issuance and distribution. The bank focuses on supporting accounts and managing deposited funds.

With this strategy, the bank signed a business agreement with Sejong Telecom in June to provide a range of services linked to the real estate fractional investment service B-Brick.

In January, the bank also entered into a partnership with Yeolmae Company, an art fractional investment platform.

Hana Bank is forming a consortium with Mirae Asset Securities and Hana Securities to plan its token securities business.

Woori Bank established a dedicated department for security tokens last year and has begun developing its platform.

"Many large financial institutions are making significant infrastructure investments to enter the token securities market. The reason is that they view security tokens as a future growth opportunity," an official from one of the fractional investment companies said.

"They will have to move forward by establishing a system that allows for collaboration with existing players in the market."

According to market research firm Dataintelo, the token securities market in the United States, where security tokens have been legislated, has grown at an average annual rate of 27 percent, reaching a market size of $1.5 billion as of last year.