Rep. Cho Seung-rae demands FSC disclose basis for capping OTC exchange licenses at two and reasons Lucentblock was rejected

Seoul

Rep. Cho Seung-rae of the Democratic Party of Korea held a press conference on the 9th at the National Assembly Press Center with the Young Lawyers' Association for Realizing Fair Value. He demanded that the Financial Services Commission (FSC) disclose the basis for capping new licenses for fractional-investment over-the-counter (OTC) exchanges at two, and the review process by which Lucentblock was eliminated at the preliminary-license stage. At its regular meeting on February 13, the FSC granted preliminary licenses to only two applicants, the NXT Consortium and KDX. The external evaluation committee's scores were 750 points for the NXT Consortium, 725 for KDX and 653 for Lucentblock. The operating plan that set the cap on new licenses was announced in September 2025 by the FSC under the Lee Jae-myung government.

Source: Financial Services Commission press reference material (Feb. 13, 2026)

Rep. Cho's demands

Cho distanced himself at the press conference from any suggestion of favoring a particular company, saying in effect, “This is not about giving special treatment to a specific company.” He said he wants to ask whether it is reasonable for a pioneer to lose its place when a new regulatory barrier goes up in a market that a small innovative company opened up through a regulatory sandbox (a scheme that temporarily suspends regulation). He also asked who would take on innovation if its fruits go to incumbents.

The young lawyers' group that joined the press conference questioned the basis on which the FSC capped the number of license recipients at two, as well as the transparency of the review. Lawyer Ahn Hee-cheol argued that even if the licensing criteria were made public in advance, the grounds for setting those criteria and the decision-making process must be explained separately, and demanded that the FSC reveal not only the review scores but also which items were rated high or low. The group demanded an explanation of whether the demonstration results of companies that took part in the regulatory sandbox were adequately reflected in the formal license review, and said eliminated companies should be given another chance to be reviewed after making up for the requirements they lacked.

FSC's review timeline

On September 4, 2025, the FSC announced its “Operating Plan for New Licenses for Fractional-Investment OTC Exchanges (Distribution Platforms).” Its core was to cap new licenses at two, citing investor protection and market efficiency, and, if more than two companies applied, to have an external evaluation committee set up by the Financial Supervisory Service (FSS) evaluate them all together. In the same document, the FSC explained that the fractional-investment market is still at an early stage and not large, and that a proliferation of distribution platforms could disperse liquidity and make assets harder to convert to cash. It also added a proviso that if fewer than two companies met the licensing requirements, the final number of licenses could fall short of two.

The FSS disclosed the evaluation items and scoring for the preliminary license at a public licensing briefing on September 18. Applications were accepted from September 23 to October 31, and on October 31 the FSC announced that three companies had applied. They were KDX, whose co-largest shareholders are Kiwoom Securities, Kyobo Life Insurance and KakaoPay Securities; the NXT Consortium, whose largest shareholder is Nextrade; and Lucentblock, a sandbox operator. The external evaluation committee, made up entirely of private-sector experts, conducted its evaluation on December 3 and 5, 2025, and the FSC voted at its regular meeting on February 13, 2026, 105 days after the application deadline.

The FSC disclosed the shareholder composition of the three applicants on February 13. KDX's co-largest shareholders are Kiwoom Securities, Kyobo Life Insurance and KakaoPay Securities; Heungkuk Securities and the Korea Exchange are listed as shareholders with stakes of 5% or more, and its roster includes about 20 securities firms and numerous fintech companies. The NXT Consortium's largest shareholder is Nextrade, and Musicow, Shinhan Investment Corp., INF Consulting, Hana Securities, Hanyang Securities and Eugene Investment & Securities each hold 5% or more. Lucentblock's largest shareholder is CEO Heo Se-young, with Korea South Pole Venture Investment Fund No. 3 and Hana Beyond Finance holding 5% or more, and the FSC summarized its participants as nine financial companies and 30 venture investment partnerships. On the same day, the FSC explained that the NXT Consortium comprises seven companies and KDX 13, so many fintech operators also take part in those two.

Source: Financial Services Commission press reference material (Oct. 31, 2025)

Gaps in scores by item

The total-score gaps the FSC disclosed on February 13 are 97 points between the NXT Consortium and Lucentblock and 72 points between KDX and Lucentblock. The FSC said the main score differences came from the requirements on equity capital, business plan and the conflict-of-interest prevention system. The FSC also disclosed the scores by item in its evaluation table.

Of the 97-point gap between Lucentblock and the NXT Consortium, 63 points come from the business plan item. On suitability of major shareholders, Lucentblock scored 100, the same as the NXT Consortium and 50 points higher than KDX. In the other items, Lucentblock's 286 points are higher than the NXT Consortium's 280.

The FSC also disclosed some of the evaluation comments. On equity capital, Lucentblock was assessed as having “equity capital markedly lower than the other applicants, and the feasibility of its plans for raising capital contributions and emergency funds is fluid depending on circumstances.” On the business plan, the assessment read: “The long-term strategy for operating an OTC exchange is insufficient, its internal rules as a financial company are inadequate, and its understanding of laws and regulations is low.” On the conflict-of-interest prevention system, the assessment was: “The stake held by the largest shareholder and related parties is 51%, so it does not substantively look like a consortium, and Lucentblock itself has the character of a personal company of an individual major shareholder.”

What was disclosed and what was not announced

The FSC did not disclose the list of evaluators or each evaluator's scoring sheet on February 13. The explanation offered as the basis for limiting new licenses to two is the statement that the market is at an early stage; the calculation that produced the number two and any estimate of market size were not announced. The detailed scoring criteria for the business plan item, which had the largest score gap (out of 300 points), and the distribution of scores by evaluator were not disclosed either.

Lucentblock's position

Lucentblock was designated for the financial regulatory sandbox in April 2021 and launched its fractional real estate investment service in April 2022. On the small license for issuing securities that the FSC created in June 2025, all six sandbox operators applied for issuance licenses, but only Lucentblock withdrew its application and switched course to an OTC exchange license. The FSC said annual trading volume through distribution channels in 2024 totaled about 14.5 billion won for the four operators that had launched services, of which Lucentblock accounted for 3.3 billion won. The FSC put fee rates at roughly 0.2% (real estate) to 0.8% (music royalties) of trading value and described it as a small market with annual fee revenue of about 150 million won.

If the two companies with preliminary licenses obtain final licenses and begin operating, Lucentblock must stop its distribution-channel business, and the fractional-investment securities it issued will be traded on the licensed OTC exchanges. If Lucentblock does not apply for an issuance license, or applies and fails to obtain one, then under the processing plan the FSC described in May 2025, the fractional-investment securities will be managed by its partner brokerage Hana Securities, and the underlying real estate by trust companies including Hana Asset Trust and Korea Investment Real Estate Trust, which will distribute proceeds to investors.

FSC's explanation

The FSC said that at its February 13 regular meeting it reviewed five issues raised so far: whether the review criteria were unfavorable to startups, whether sandbox operators are guaranteed a license, whether a merger review or capital contribution approval is needed at the preliminary-license stage, whether participants in KDX and the NXT Consortium got around major-shareholder screening through non-voting shares, and whether the NXT Consortium misappropriated technology.

The FSC explained that it had built in preferential measures for startups. It recognized venture fund investments as equity capital, gave sandbox operators bonus points of up to 50, and extended the consortium bonus to existing startup corporations. Considering the provisions of the Financial Innovation Act and the National Assembly's legislative discussions, the FSC said a license is not guaranteed for sandbox operators, and wrote that a consensus had formed that “processing according to the announced policy” is what matters.

On the technology misappropriation issue Lucentblock raised against the NXT Consortium, the external evaluation committee gave the opinion that there was “no objective basis, and no criminal complaint or accusation has been filed to date,” and that while business cooperation appears to have taken place, it was judged not to be technology misappropriation or the like. In approving the NXT Consortium, the FSC attached a condition that the final license review will be suspended if the Korea Fair Trade Commission opens a formal administrative investigation.

At the National Assembly Political Affairs Committee's parliamentary audit on October 22, FSC Chair Lee Eog-weon, asked about the possibility of additional licenses, replied, “We will look at market conditions and consider that as well if there are various needs.” The FSC had also said on February 13 that it discussed considering additional licenses in the future, taking into account the passage of the token securities bill (amendments to the Electronic Securities Act and the Capital Markets Act) at the National Assembly plenary session on January 15 and the rising trend in demand for fractional investment.

Final license schedule

The NXT Consortium and KDX, which received preliminary licenses, must within six months fulfill the contents and conditions of the preliminary license and then apply for capital contribution approval under the Act on the Structural Improvement of the Financial Industry and for the final license. They begin operations once the final license is approved.

The FSC attached a condition to the NXT Consortium that the final license review will be suspended if the Korea Fair Trade Commission opens an administrative investigation.

Sources (KST)

• Financial Services Commission · 2026-02-13 · Preliminary license for beneficiary-certificate OTC trading brokerage business (fractional-investment OTC exchange), decision at the FSC regular meeting (Feb. 13, 2026) (press reference material) · https://www.fsc.go.kr/no010101/86295
• Financial Services Commission · 2025-10-31 · Results of preliminary-license applications for fractional-investment OTC exchanges (distribution platforms) (press reference) · https://www.fsc.go.kr/no010101/85593
• Financial Services Commission · 2025-09-04 · Guide to the operating plan for new licenses for fractional-investment OTC exchanges (distribution platforms), discussed at the 15th FSC meeting (press release) · https://www.fsc.go.kr/no010101/85244