Financial Services Commission “Music Cow music copyright is also a security” NFT, art, real estate, etc. ‘sculpture investment’ institutional rights

On April 20, the financial authorities finally determined that the product of Music Cow, a sculpture investment platform (right to participate in music copyright fees), was an investment contract security under the Capital Market Act.

Music Cow is a platform that sells claim rights to receive revenue from music copyrights. Investors can buy and sell shares of this copyright like stocks, and receive monthly copyright income according to their shares. The number of Music Cow members jumped from 40,000 in 2019 to 910,000 last year. Last year, only 274.2 billion won was traded on Music Cow. However, there have been complaints that transactions through this ‘piece investment’ are similar investment businesses, and pointed out that the regulations under the Capital Market Act to protect investors have not been applied. As the public offering was conducted for a large number of investors, if a risk factor such as bankruptcy occurred, the number of victims increased rapidly, but it was in a regulatory blind spot.

The Securities and Futures Commission under the Financial Services Commission said, “As the first application of investment contract securities, awareness of the illegality was low, and over five years of operation, about 170,000 investors were expected to continue the business. Comprehensively considering the potential to contribute to this, the sanctions procedure will be suspended for the time being. The grace period granted by the SSC to Music Cow is six months. Music Cow must submit to the financial authorities a plan for business restructuring, including measures to protect investors, such as depositing investor deposits in real names at external financial companies such as banks by October 19th.

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