Impact of President Lee's Remarks? Financial Services Commission Again Delays Approval of STO OTC Exchanges

The Financial Services Commission has once again postponed its final decision on the selection of Security Token Offering (STO) over-the-counter (OTC) exchange operators. Observers note that this delay was influenced by LucentBlock, which was effectively eliminated from consideration and has since publicly raised concerns over fairness, as well as by President Lee Jaemyung's unusual mention of the issue during a recent Cabinet meeting.

According to financial authorities on January 28, the Financial Services Commission did not include the 'STO OTC Exchange Preliminary Approval Application' on the agenda for its regular meeting held that afternoon. The issue was originally expected to be discussed at the Securities and Futures Commission under the Financial Services Commission on January 7, and then to be included in the regular meeting agenda on January 14, but it has now been omitted twice in a row.

Previously, the Securities and Futures Commission reportedly selected the 'KDX Consortium' led by the Korea Exchange (KRX) and the 'NXT Consortium' led by Nextrade (NXT). Typically, passing the Securities and Futures Commission is considered the biggest hurdle in the approval process. However, after LucentBlock, which was effectively eliminated, publicly raised concerns about the fairness of the preliminary approval process, the controversy has continued to grow.

Seyoung Heo, CEO of LucentBlock, held an emergency press conference on January 12, stating, "The administrative procedures and market restructuring centered on vested interests that are occurring during the institutionalization process are completely at odds with the intent of the legislation," and argued that the approval process lacked fairness. He also raised suspicions that NXT had signed a Non-Disclosure Agreement (NDA) with LucentBlock prior to applying for business approval and subsequently misappropriated its technology.

It is considered unusual for a matter that has passed the Securities and Futures Commission to be omitted from the agenda of the Financial Services Commission's regular meeting twice in a row. Analysts point out that President Lee Jaemyung's rare mention of the individual licensing issue during a Cabinet meeting-asking, "What decision has been made regarding the approval of fractional investment?"-has also influenced the Financial Services Commission's decision-making. The Ministry of SMEs and Startups has also indicated that this incident highlights the need to improve the regulatory sandbox system.

Regarding this, Lee Eogweon, Chairman of the Financial Services Commission, avoided giving a direct answer at a press conference that morning when asked whether there was room to expand the number of approved STO OTC exchanges to three. Chairman Lee stated, "Since the Financial Services Commission's approval process is still ongoing, it would not be appropriate to comment here," and added, "After the decision, we will explain the results in a fair and transparent manner." Previously, the Financial Services Commission had announced that it would select up to two out of the three applicants for OTC exchange business approval.

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