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Nextrade, Korea Exchange consortia win nod for STO platforms
Lee Eog-weon, chairman of the Financial Services Commission (FSC), speaks during a briefing by FSC-affiliated institutions at Government Complex Seoul, Jan. 12. Courtesy of FSC
By Jun Ji-hye
Lucentblock eliminated, NXT approval tied to potential antitrust watchdog probe
The Financial Services Commission (FSC) has named two consortia — the KDX consortium led by the Korea Exchange and the NXT consortium led by alternative trading platform Nextrade — as operators of new over-the-counter trading platforms for fractional investment, officials said Friday.
Lucentblock, a startup operating a fractional real estate investment platform that had drawn attention after alleging procedural unfairness and misappropriation of technology, was eliminated after receiving the lowest marks, including in equity capital.
Mindful of the controversy surrounding Lucentblock’s claims, the FSC disclosed detailed scoring results in an unusual move, saying it had applied startup-friendly criteria and that Lucentblock fell short in several areas, including its business proposal.
Regarding the complaint Lucentblock filed with the Fair Trade Commission (FTC) over alleged technology theft by Nextrade, the FSC effectively left the matter to the antitrust watchdog, stipulating that the final licensing review would be suspended if the FTC formally launches an administrative probe.
The approvals mark a step foward for the fast-emerging security token offering (STO) market, after the National Assembly passed amendments last month to the Capital Markets Act and the Electronic Securities Act, aimed at institutionalizing tokenized securities.
STOs incorporate fractional investments — shared ownership and profit rights in real-world assets such as real estate and art — into the formal financial system using blockchain infrastructure.
The FSC said that the NXT consortium topped the external evaluation with a score of 750 in the three-way competition, followed by the KDX consortium at 725, while Lucentblock received 653, leading to its elimination.
According to the regulator, the startup lagged in multiple assessment categories. Its capital base was significantly smaller than those of its rivals, and its plans for raising funds and securing contingency financing were deemed unreliable. Authorities also found that its business plan lacked a long-term operational road map as well as governance standards expected of a financial institution.
The NXT consortium received conditional clearance despite Lucentblock’s allegations of technology theft.
Lucentblock CEO and co-founder Huh Se-young speaks during a press briefing in Seoul, Jan. 12, to outline the company’s position on the licensing of over-the-counter trading platforms for security tokens. Yonhap
Lucentblock CEO and Co-Founder Huh Se-young claimed that Nextrade approached his company under the pretext of a potential investment and consortium partnership, signed a nondisclosure agreement, and obtained sensitive information including financial data, business plans and proprietary technology. He said Nextrade later terminated discussions and filed its own license application in the same business area.
The FSC said that due to their conditional approval, if the FTC initiates an administrative investigation into Nextrade under the Fair Trade Act, the full licensing review of NXT would be put on hold.
Founded in 2018, Lucentblock operates the country’s first fractional real estate investment platform under the FSC’s regulatory sandbox program. The company has played a key role in shaping the market, attracting around 500,000 users and recording cumulative transactions of 300 billion won ($207 million).
Lucentblock strongly protested their elimination, arguing that despite running its service for seven years, its track record was overlooked and it has been “driven to the edge of shutdown by entrenched interests.”
After failing to secure designation as an STO over-the-counter platform operator, Lucentblock can maintain its current operations for a limited period under its sandbox status if it applies for a fractional investment issuance license. However, once a licensed exchange officially launches following full approval, the firm will have to exit the distribution business, with its securities traded on authorized platforms instead.
If Lucentblock does not apply for or fails to obtain an issuance license, its existing assets will enter a wind-down process. Assets subject to resolution through brokerages and trustees are estimated at about 25 billion won, affecting some 45,000 investors.
Meanwhile, Lucentblock CEO Huh said later in the day that the company helped establish early standards for STOs.
“We expanded beyond conventional fractional investment services, becoming the first to build a tokenized securities distribution structure based on electronically registered beneficiary certificates and linking the Korea Securities Depository’s electronic registry with brokerages,” he said.