Startup Industry Accuses FSC of Shifting Blame to KFTC in STO Controversy
The Financial Services Commission (FSC) recently approved preliminary licenses for security token offering (STO) operators and granted NXT, Nextrade a ‘conditional’ license. The FSC stated that if the Korea Fair Trade Commission (KFTC) begins an investigation into allegations of NXT’s theft of a startup’s technology, it will suspend the final licensing review. The startup industry has criticized, saying, “The FSC is trying to shift responsibility for the startup-killing controversy to the KFTC.”
The FSC held a regular meeting on the 13th and approved preliminary license applications from the NXT consortium and the KRX, Korea Exchange consortium. STO refers to a method of trading rights to real assets (such as real estate) and financial assets (such as stocks and bonds) in small units using blockchain technology. In South Korea, the startup Lucentblock demonstrated business viability, and the FSC pushed for institutionalization last year. Instead of selecting Lucentblock, the FSC chose NXT — which has a former FSC official as its head — and KRX as operators.
However, the FSC granted NXT, which ranked first in the evaluation, a conditional license. This decision followed allegations that NXT stole Lucentblock’s technology. Last year, NXT signed a non-disclosure agreement (NDA) with Lucentblock while reviewing participation in its consortium, received business materials, and then directly entered the STO business. NXT CEO Kim Hak-su had even promised Lucentblock CEO Huh Se-young that it would not enter the STO business.
Regarding this, the FSC stated, “While there appears to have been business cooperation, we judged that no technology theft occurred,” but added, “Since the KFTC’s judgment may differ, we will suspend the final licensing review if an administrative investigation into technology theft begins under the Fair Trade Act.” Lucentblock is pinning faint hopes on the KFTC.
The startup industry is outraged by the FSC’s decision. A source from the startup industry said, “The FSC’s statement that it will wait for the KFTC’s judgment is an attempt to shift responsibility for the startup-killing controversy to the KFTC,” adding, “It is more offensive that they use the word ‘conditional’ as if they are being considerate toward startups.”
The NXT consortium has already begun preparing to establish a corporation, aiming to open an over-the-counter exchange in the fourth quarter of this year. It is rare for a preliminary license holder to fail in the final review. The selection of STO operators is an issue that has drawn significant attention not only from the president but also from political circles. This is why critics argue that the FSC has played a face-saving card by issuing a conditional license to avoid responsibility for the startup-killing controversy.
