[비즈한국] The institutionalization of fractional investment, where high-value assets are divided and traded among multiple investors, has entered its final stage. The Financial Services Commission (FSC) recently unveiled its policies regarding new authorizations ahead of incorporating "fractional investment trading platforms" into the formal financial system. As fractional investment firms that have been operating under "innovative financial service" exemptions prepare for a fresh start as formal financial investment businesses, attention is also turning to the status of token security (STO) legislation, which will be the key to the full institutionalization of fractional investment.
On the 4th, the FSC provided guidance on operating plans ahead of new authorizations for over-the-counter (OTC) fractional investment exchanges (trading platforms). The financial authorities will establish a new authorization unit for operating platforms that can trade fractional investment securities at the end of September. The authorization for fractional investment trading platforms follows amendments to the enforcement decree and supervisory regulations of the Capital Markets Act, which are scheduled to take effect on September 25 to institutionalize innovative financial services. The FSC approved these measures during its 15th meeting on the 3rd.
In establishing the framework for fractional investment, financial authorities separated issuance from distribution to prevent conflicts of interest, where an issuer might otherwise also handle trading. In June, a "small license" for issuance and brokerage was introduced for firms issuing fractional investment securities (trust beneficiary certificates), and now an authorization for distribution-focused brokerage has been created to allow the sale of these securities on OTC exchanges. On these fractional investment trading platforms, securities from various fractional investment firms can be traded in one place. Just like trading stocks or virtual assets, these securities can be listed or delisted, and a disclosure system will be implemented.
However, the number of new authorizations for fractional investment trading platforms will be capped at two. Financial authorities determined that the fractional investment market is still small, with an annual purchase volume of only 14.5 billion won (as of 2024), and that having too many platforms would fragment liquidity and reduce market efficiency. The explanation is that because low liquidity for these securities can harm investors, the authorities intend to concentrate liquidity to vitalize trading.
Over the past 2–3 years, many securities firms signed MOUs with fractional investment companies but failed to show significant activity. Now, however, the authorization of these trading platforms opens a new opportunity for them to enter the market. The FSC specified three factors for preferential consideration when selecting trading platform operators: a consortium approach involving securities firms and fractional investment companies, utilization of small-to-medium enterprise (SME)-specialized securities firms that focus on venture capital, and the capability to rapidly launch trading platform services.
The FSC favored the participation of securities firms, judging that a consortium involving multiple such firms would be advantageous in securing potential investors and fractional investment securities. The preference for SME-specialized securities firms stems from the expectation that underlying assets held by SMEs can be securitized and used as a means of fundraising. Applications for preliminary authorization for trading platforms will be accepted for one month following the implementation of the amendments to the Capital Markets Act enforcement decree and supervisory regulations.
Fractional investment is broadly divided into "investment contract securities," where investors invest money in a joint project with others and receive profits or losses based on the results, and "trust beneficiary certificates," where investors entrust the management of a single underlying asset to others to receive profit. Fractional investment in art or Korean beef can be issued by disclosing a securities registration statement as investment contract securities. In contrast, fractional investment in real estate, intellectual property (IP), and aircraft falls under non-monetary trust beneficiary certificates. Currently, firms dealing in trust beneficiary certificates can only operate under the "innovative financial service" designation.
Authorities believe that once the law is amended and the trading platform system is fully implemented, the institutional improvement for fractional investment will be largely complete. Once fractional investment firms, which have operated for years under the innovative financial service exemption, obtain the required authorization, they will be able to conduct business as formal financial investment firms. There are six firms currently designated as innovative financial service providers for fractional investment: Kasa, Lucent Block, Funble, Musicow, Apanda, and Galaxia MoneyTree094480.
However, since the institutionalization is gradual, it is expected to take time for the market to stabilize. With the separation of securities issuance and distribution, firms that previously handled both were faced with a choice, and most opted for the issuance business. Real estate fractional investment firms Kasa and Funble, whose innovative financial service terms are expiring, applied for preliminary brokerage authorization in June and are awaiting review. Music copyright investment firm Musicow also plans to apply for issuance authorization within September.
On the other hand, another real estate fractional investment firm, Lucent Block (service name "Sowoo"), changed its strategy to seek distribution authorization after initially applying for issuance authorization. Its goal is to focus on securities trading via its platform and handle various physical assets beyond real estate. Heo Se-young, CEO of Lucent Block, stated, "We will build a physical asset exchange that investors can trust within the institutional framework."
A limitation remains: even with the creation of fractional investment trading platforms, secondary trading of investment contract securities is not permitted. This is because the trading platforms awaiting authorization in September are aimed at trust beneficiary certificates. In the early days of fractional investment services, investors could buy and sell securities among themselves on platform markets, but secondary trading was restricted as a matter of principle when fractional investment was designated as an innovative financial service in 2022. As it became difficult to dispose of securities before profit was realized, liquidity dropped and the market shrank. An official from an investment contract securities firm said, "Since it is difficult to cancel or transfer securities midway until they are all issued and sold, it takes time for investors to see a return, making platform vitalization difficult," adding, "That is why firms are seeking ways to diversify revenue."
Given this, STO legislation has become the final piece of the puzzle for the institutionalization of fractional investment. If STO is introduced—which involves issuing physical assets as blockchain-based securities—it will enable securities trading regardless of asset type. An industry official said, "There is talk that the outline for STO legislation may emerge late this year or early next year, so we are hopeful," adding, "If multilateral trading becomes possible, I think the number of investors will increase significantly."
Attention is also focused on whether STO legislation will be passed during the current administration's first regular parliamentary session. Currently, two STO-related bills are pending in the National Assembly's National Policy Committee subcommittee: the "Act on Electronic Registration of Stocks, Bonds, etc." (Electronic Securities Act) concerning the issuance of token securities, and amendments to the Capital Markets Act regarding the distribution and inter-investor trading of investment contract securities.