Naver Financial Eyes Upbit Stock Swap to Lead Won Stablecoin Ecosystem

Executive Summary

Naver Financial is in discussions for a stock swap with Dunamu, the operator of Upbit, to integrate the crypto exchange into its group. This potential merger aims to establish a dominant won-based stablecoin ecosystem in South Korea.

The Event in Detail

Naver Corporation's fintech subsidiary, Naver Financial, is engaged in advanced discussions with Dunamu Inc., the operator of Upbit, for a comprehensive stock-for-stock merger. The proposed deal would see Dunamu become a wholly-owned subsidiary of Naver Financial, bringing South Korea's largest cryptocurrency exchange under the umbrella of the internet giant's financial arm. Naver Corporation holds approximately 75% of Naver Financial. The anticipated transaction led to an 11.4% surge in Naver shares to 254,000 won on the news. This development builds upon earlier collaborations between Dunamu and Naver Pay concerning a won-based stablecoin business and Naver Pay's acquisition of a 70% stake in Dunamu's unlisted stock platform, Ustockplus.

Financial Mechanics and Strategic Rationale

The core of the proposed deal is a stock swap, where the two companies would exchange shares, leading to Naver Financial gaining 100% ownership of Dunamu. This integration is designed to combine Naver Financial's annual transaction volume of 80 trillion won ($57 billion) with Upbit's daily trading volumes, which can reach $2.9 billion, positioning the combined entity as a major force in the South Korean digital finance sector. A primary strategic objective is the expedited development and issuance of a won-pegged stablecoin. Dunamu, through its blockchain technology and the recently launched Ethereum Layer-2 blockchain GIWA, is expected to issue these tokens, which would then circulate on Naver Pay, Naver's extensive payment application with 30.68 million users. Analysts from Mirae Asset Securities Co. project that a joint won-pegged stablecoin initiative could generate as much as 300 billion won in annual revenue by 2030.

Market Implications

The potential affiliation between Naver Financial and Dunamu is expected to significantly reshape the Korean digital finance landscape. Integrating Upbit with Naver's vast ecosystem, including its 40 million user base, could lower barriers to entry for new crypto users by simplifying processes like Know Your Customer (KYC). This could accelerate user growth for Upbit, which currently has 10 million cumulative registered users. The alliance aims to compete globally with established fintech firms such as PayPal, Stripe, and Coinbase. The move also strengthens South Korea's position in the stablecoin market, coinciding with the country's push for supportive legislation. While Upbit pursues this integration, rival exchange Bithumb recently announced a partnership with World Liberty Financial, indicating a competitive landscape for institutional crypto adoption.

Broader Context and Regulatory Landscape

This strategic alignment occurs amidst South Korea's proactive stance on regulating digital assets. The Financial Services Commission (FSC) is preparing to introduce a government bill in October as part of the second phase of the nation's Virtual Asset User Protection Act. This legislation is anticipated to outline requirements for the issuance, collateral management, and internal control systems of stablecoins. The government's push for local-currency stablecoins is driven by a desire to reduce reliance on predominantly dollar-based stablecoins, which currently account for 99.8% of the total stablecoin market value of $266.7 billion. Dunamu's new GIWA platform, an Ethereum Layer-2 solution, is positioned as a global development platform aiming to bring Korean innovation to the global Web3 ecosystem, moving beyond solely exchange services.

Synergies and Outlook

The merger is anticipated to create substantial synergies. For Naver, integrating stablecoins into its 50.3 trillion won annual transaction volume (Naver Shopping) through Naver Pay could reduce credit card fees and enhance settlement efficiency. For Dunamu, the integration into Naver's ecosystem offers significant user expansion opportunities and new revenue streams from blockchain fees on GIWA Chain and stablecoin payment services. The affiliation is also expected to enhance trust in crypto services through Naver's established brand reputation. While the benefits are considerable, potential challenges include increased regulatory scrutiny of a combined financial and crypto entity, integration complexities between different corporate cultures and technological platforms, and the inherent market volatility of cryptocurrencies. Finalization of the deal requires approvals from financial authorities, board resolutions, and shareholder meetings, with both companies confirming ongoing discussions without a definitive conclusion.