Lucent Block exclusion sparks debate over South Korean fractional investment regulation

A controversy has emerged in South Korea regarding the formalization of the fractional investment market after Lucent Block, a startup that operated under a regulatory sandbox for five years, was excluded from receiving an official over-the-counter (OTC) exchange license.

The Financial Services Commission (FSC) recently granted preliminary licenses for OTC profit-security brokerage to two consortia: one led by Nextrade (NXT) and another led by the Korea Exchange (KDX). Lucent Block, which operates the real estate fractional investment platform ‘Sou’, received a lower evaluation score (653) compared to the NXT consortium (750) and KDX (725). The FSC cited lower scores in areas such as capital adequacy, funding plans, governance, and conflict-of-interest prevention systems.

Political figures and industry observers have criticized the decision, suggesting that the government allowed a startup to pioneer a market through the regulatory sandbox only to exclude them once the market reached the formal institutionalization stage. Some lawmakers have compared the situation to the ‘Tada incident’, where a mobility startup faced sudden regulatory hurdles. While the FSC maintains that the sandbox permitted product issuance rather than full-scale distribution and that the limit of two licenses was pre-announced to ensure market efficiency, Lucent Block is requesting a formal review process under the Financial Innovation Support Special Act to prove its regulatory compliance and operational capabilities.