Heo Se-young, CEO of Lucent Block, made this appeal on the 8th while appearing as a witness at the National Assembly’s Political Affairs Committee’s parliamentary audit of the Financial Services Commission, held at the National Assembly in Yeouido, Seoul. He raised concerns regarding the policy on licensing over-the-counter exchanges for fractional investment.
CEO Heo stated, “Realistically speaking, this business may not yield immediate financial gains, and even after receiving authorization, it may require years of grueling effort,” adding, “We are not giving up because we are committed to upholding our values of protecting customers, shareholders, and employees, and creating a better form of capitalism that provides everyone with the opportunity to own assets.”
CEO Heo emphasized that, due to the nature of the financial industry, creating a new business model from scratch requires enormous time and cost, but it is easy to imitate. He argued, “Venture capital raised within the industry for this project exceeds 100 billion won,” adding, “The provision granting exclusive operating rights in the Special Act on Support for Innovative Finance is intended to protect the upfront investments and efforts of innovative businesses.”
On that day, the controversy surrounding the authorization of the fractional investment over-the-counter exchange was brought up during a National Assembly audit. Critics raised repeated questions about whether it was fair to grant market entry opportunities to large operators, such as the Korea Exchange and Nextrade, instead of startups that had proven their business viability over several years through the regulatory sandbox.
Founded in 2018 as a real estate fractional investment platform, Lucent Block is the only fintech company in the Chungcheong region and was the first to design the current fractional investment structure. It is also one of the few fractional investment startups among the more than 1,112 companies participating in the regulatory sandbox that began the relevant business early on and has maintained it to the present (as of the 8th, 2,878 days since its founding).
However, Lucent Block failed to secure preliminary approval for an over-the-counter (OTC) exchange for fractional investment, which was finalized at the Financial Services Commission’s regular meeting on February 13. In effect, the company received notice of its rejection ahead of the institutionalization of token securities scheduled for next February. In contrast, the KDX consortium—in which the Korea Exchange (KRX) participates—and the NXT consortium led by Nextrade both passed the preliminary approval process.
Rep. Cho continued, “Is it consistent with the value of fairness emphasized by the Lee Jae-myung administration to deny licensing rights to companies that have conducted pilot tests for four years through the regulatory sandbox, while granting approval only to large operators?” He raised his voice, asking, “Is it acceptable to just exploit them for all they’re worth and then discard them?”
Rep. Cho pointed out, “There is no law stating that there must be only two exchanges, is there?” calling it “a deeply flawed policy decision.” He added, “There are indications that the CEO of Nextrade (NXT) was involved in various ways,” and requested that the ruling and opposition party floor leaders summon the Nextrade CEO as a witness for the comprehensive audit on the 22nd.
Rep. Park Min-kyu of the Democratic Party of Korea also pointed out, “This is an issue that could subject the Financial Services Commission to immense criticism and misunderstanding within the startup ecosystem,” adding, “Since this concern stems from a sense of responsibility toward startup shareholders and employees, we need to examine the relevant details thoroughly.”
However, financial authorities maintained that the scope of operations for existing innovative financial services differs from that of the new over-the-counter exchange, arguing that they had provided sufficient opportunity. Financial Services Commission Chairman Lee Eun-won said, “I agree that startups are the future hope of Korean society and that we must create a level playing field where the passion of young entrepreneurs can flourish,” adding, “With the belief that there should be no ‘tilted playing field,’ I have consistently emphasized the transparency and fairness of the licensing process.”
He explained that exceptions were granted to regulations regarding venture capital (VC) fund investments to ensure startups were not at a disadvantage, and that existing consortia were allowed to continue operating. However, Chairman Lee emphasized the difference between the two systems, noting, “What was permitted through the regulatory sandbox was the issuance of fractional investment products, whereas what we are authorizing this time is the distribution of such products.”
Chairman Lee replied, “Since some distribution is necessary for issuance, we permitted distribution only for products issued by the issuer itself,” adding, “The authorization for this OTC exchange differs in that it targets a market that distributes products from all issuers.” Chairman Lee expressed regret that the system had not been adequately explained. He said, “If we had explained the purpose of the system to young innovators in advance and provided them with consulting, we might have achieved better results.”
Allegations of technology theft also emerged as a key issue. When Yoo Dong-soo, Chair of the Policy Committee (Democratic Party of Korea), asked whether Lucent Block had secured intellectual property rights for its business model, Chairman Lee Eun-won explained that the authorization process had been temporarily suspended due to allegations of technology theft related to Nextrade. Chairman Lee said, “The Fair Trade Commission reviewed whether technology theft had occurred, and after concluding that it had not, we resumed the licensing process that had been suspended,” adding, “Our position was that if technology theft had been confirmed, we would have revoked Nextrade’s license.”
Chairman Lee explained, “The decision to limit the number of authorized operators to two was made after considering market conditions and efficiency,” and added, “We will monitor how the market develops and examine whether there are opportunities to grant additional authorizations in the future.”
