STO Exchange Row Spills Into Startup Spat

Part of front-runner NXT consortium

Musicow: "A decade-long fractional investment business

You can’t call Lucent Block the only innovator"

A dispute over the preliminary approval for an over-the-counter exchange for security tokens (STOs) is escalating into a public spat among startups. After Lucent Block, a fractional investment platform that is all but certain to be dropped from the preliminary approval process, raised concerns over fairness, saying that “a government agency hijacked the innovation pioneered by startups,” Musicow, a member of a rival consortium, pushed back head-on, calling it “a claim that overlooks market stability and the public interest.”

On the 13th, Musicow, a platform for fractional investment in music rights, said, “The business plan of the NXT (Nextrade) consortium (a leading candidate) fully reflects Musicow’s market know-how accumulated on the back of an overwhelming market share.” Musicow is a fractional investment operator participating in the NXT consortium. Since its establishment in 2016, it has operated a fractional investment business in music copyrights for about 10 years.

Musicow’s public rebuttal comes after Lucent Block raised issues during the preliminary approval process, arguing that “startups that pioneered the market through the regulatory sandbox were excluded at the institutionalization stage.” Lucent Block claimed at a press briefing the previous day that the Financial Services Commission effectively put startup-led consortia into a structure destined to be eliminated by limiting the number of preliminary approval recipients to up to two. The key point raised was that “those who bore the burden of innovation and those who benefited from institutionalization ended up diverging.”

In response, Musicow said, “An OTC exchange for fractional investment requires stability and a public-interest function as secondary trading infrastructure, which is a different dimension from issuance track records,” adding that “a partnership with a financial infrastructure institution equipped with market operation experience and an investor protection framework is unavoidable.” It also noted that “multiple fractional investment startups, including Musicow, are participating in the NXT consortium, yet portraying only a specific company as the face of innovation is a distortion.” It said the NXT consortium includes four leading fractional investment firms—Musicow, Sejong DX, Stockkeeper and Together Art—that are joining with their companies’ fortunes at stake.

Lucent Block is the only fractional investment company within the Lucent Block consortium. The industry is also voicing concerns that if the controversy drags on, the launch of the fractional investment market itself could be delayed.

Reporter Ahn Jeong-hoon ajh6321@hankyung.com