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"The government opened a regulatory sandbox as a playground and told innovative companies to run freely within it. For companies that have conducted demonstrations for several years, created markets, and proved their potential within that sandbox, there must be an opportunity to compete again in the 'main game' after institutionalization."
Park Yong-jin (President), Vice Chairman of the Presidential Regulatory Reform Committee, made these remarks on the 18th via his Facebook, stating that Lucent Block, which failed to receive preliminary approval for a secondary market for fractional investment, should be given another chance.
Vice Chairman Park evaluated Lucent Block as "a young startup that has been pioneering the fractional investment market for nearly seven years based on trust in the government's regulatory sandbox." He also mentioned that it has accumulated 500,000 users and issuance and distribution achievements worth 30 billion won without any financial incidents.
He stated, "Such a company now finds itself in a situation where it must worry about its survival during the institutionalization process. I believe this is not merely an issue for one company," and pointed out, "It cannot be the conclusion of regulatory innovation to let companies run in the sandbox but then bench them when the main game begins."
Established in 2018, Lucent Block received designation as an Innovative Financial Service (Regulatory Sandbox) from the Financial Services Commission in 2021 and has been operating a real estate fractional investment platform called 'Soyu'. It was the first in the industry to build a distribution structure based on electronic registered profit-sharing securities through collaboration with Hana Securities, Korea Depository & Settlement, and others.
The starting point of the 'Lucent Block incident' was February 13 last year. At its regular meeting, the Financial Services Commission decided on two consortia as candidates for preliminary approval for 'profit-sharing securities over-the-counter brokerage business,' that is, a fractional investment secondary market: the KDX consortium centered on Korea Exchange and KOSCOM, and the NXT consortium centered on NextTrade and MusicCow.
The Financial Services Commission had previously prepared an approval operation plan to limit new operators to a maximum of two companies for reasons of investor protection and market efficiency. Lucent Block, which applied together, failed to cross this threshold, blocking its entry into the formal system and making the continuity of its business uncertain.
The Financial Supervisory Service External Evaluation Committee stated regarding Lucent Block that "while it has experience operating a distribution platform, its long-term strategy for operating an over-the-counter exchange is insufficient."
The review process was noisy throughout. After Lucent Block raised issues of fairness by claiming that "established exchanges with strong capital are free-riding on the achievements of innovative industries," interest in this review grew even larger after President Lee Jae-myung mentioned the transparency and fairness of licensing procedures at a State Council meeting last January.
After failing the review, Lucent Block has not given up and has expressed its will to try again. First, it applied for issuance approval to avoid operating without a license and prevent gaps in business, with plans to address governance and internal control issues pointed out during the review process and challenge distribution approval again.
The need for rescue is also being raised in political circles. Min Byeong-deok, a Democratic Party of Korea lawmaker on the National Assembly's Political Affairs Committee, conveyed his opinion last month to the Financial Services Commission requesting an additional opportunity for preliminary approval application, pointing out that "it sends a bad signal to those who want to start businesses when companies that participated in the sandbox fail."
Heo Se-young, CEO of Lucent Block, directly suggested institutional improvements at a communication symposium co-hosted recently by the Korea Chamber of Commerce and Industry and the Regulatory Reform Committee. The content included requests for an additional preliminary approval procedure for innovative financial businesses meeting certain criteria and the establishment of standard procedures for transitioning to the formal system after demonstration.
Vice Chairman Park said, "The approval review results and procedures of the Financial Services Commission must be respected," but also emphasized, "Lucent Block is not requesting special privileges or automatic approval. It should be given a fair opportunity to compete again based on its demonstration achievements and investor protection records."
He added, "The market will not shake just because one more competitor participates," and stressed, "On the contrary, having more competitors competing properly can help market innovation and consumer benefits."
He continued, "In the end, the key to solving this problem lies with the Financial Services Commission," and announced that he would meet directly with Vice Chairman Kwon Dae-young of the FSC this week to discuss the Lucent Block issue. This includes a joint review of plans for another attempt, including an additional preliminary approval application.
He also previewed consultations with Han Seong-suk (Prime Minister), who previously served as Minister of the Ministry of SMEs and Startups. Vice Chairman Park stated, "I have a meeting with the Prime Minister. Since he is well aware of this matter, I will discuss it with him as well."
He said, "The regulatory sandbox should not remain merely as a space to temporarily test innovative companies," and added, "Connecting companies that have shown their potential through demonstration so they can compete again in the formal market is what proper regulatory innovation entails."
He further emphasized, "Experimentation, innovation, challenge, and comeback are the spirit of startup support for innovative growth under the Lee Jae-myung government," and stated, "We will work together to find ways to open a door for fair re-attempts for companies that have pioneered the market, including through additional preliminary approval applications."
[MoneyToday startup media platform 'Unicorn Factory']
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