South Korea's Fintech-Crypto Merger Ambitions Stumble Over Regulatory Hurdles

Naver Corp. and Dunamu Inc., the operator of South Korea's largest cryptocurrency exchange Upbit, face significant legal and regulatory challenges as they pursue a proposed merger that could reshape the country's fintech landscape. The deal, which would integrate Dunamu's blockchain infrastructure with Naver's digital ecosystem, encounters hurdles spanning financial regulations, stablecoin policies, corporate governance, and shareholder dynamics, according to multiple reports5 Legal Hurdles Stand in Path of Crypto Exchange Operator …^[1] Inside Korea’s Next Fintech Pivot: What Naver – …^[2] Reports: Internet giant Naver may merge with crypto …^[6].

A primary obstacle lies in South Korea's traditional financial industry guidelines, which currently prohibit electronic financial service providers from engaging in crypto-related activities. Naver Financial, classified under the Electronic Financial Transactions Act, would require regulatory revisions to merge with Dunamu and operate a crypto exchange. This restriction complicates the integration of Naver's existing services with Upbit's market dominance, which controls approximately 72% of South Korea's crypto trading volume5 Legal Hurdles Stand in Path of Crypto Exchange Operator …^[1].

Stablecoin legislation further complicates the merger. While President Lee Jae-myung has signaled support for legalizing KRW-pegged stablecoins, the Bank of Korea (BOK) advocates a bank-centric model, limiting issuance to commercial banks or their consortia. This stance could force the Naver-Dunamu alliance to act as a technological partner in a bank-led consortium rather than directly issuing stablecoins. Such constraints may undermine the merger's strategic goal of expanding Naver Pay's payment ecosystem through a KRW-pegged token5 Legal Hurdles Stand in Path of Crypto Exchange Operator …^[1] Reports: Internet giant Naver may merge with crypto …^[6].

Regulatory conflicts also arise from the Virtual Assets Act, which prohibits exchanges from listing coins issued by affiliated entities. If the merged firm issues a stablecoin, it would face a dilemma: either avoid listing it on Upbit or risk regulatory non-compliance. Analysts suggest workarounds, such as listing on international exchanges, but these could dilute the merger's intended synergies5 Legal Hurdles Stand in Path of Crypto Exchange Operator …^[1].

Corporate governance issues add another layer of complexity. The proposed stock swap, which would make Dunamu a subsidiary of Naver Financial, requires navigating minority shareholder protections under revised Commercial and Capital Markets Acts. These laws mandate "fair value" offers for minority stakes, raising the risk of class-action lawsuits if compensation is deemed inadequate. Additionally, Dunamu's Chairman Song Chi-hyung, who holds 25.5% of the company, is speculated to become the largest shareholder of the merged entity. However, regulatory compliance for such a transfer remains uncertain, as it would likely require more than a simple stock transaction5 Legal Hurdles Stand in Path of Crypto Exchange Operator …^[1] 'Could Be Forced to Hand Over Subsidiary Stake to Rival'—Kakao …^[3].

Complicating matters further, Kakao Investment's 10.6% stake in Dunamu could force Naver to cede a portion of its Naver Financial subsidiary to its rival. This "Kakao dilemma" highlights the delicate balance between securing shareholder approval and maintaining control. Kakao's potential opposition to the share swap could trigger a costly cash-out, estimated at 1.16 trillion won ($890 million), based on Dunamu's current valuation'Could Be Forced to Hand Over Subsidiary Stake to Rival'—Kakao …^[3].

Despite these challenges, analysts view the merger as a strategic move to position South Korea as a global fintech-crypto hub. The combined entity, with annual revenue exceeding 3.3 trillion won (USD 2.4 billion), could pioneer cross-border stablecoin systems and AI-driven financial services. However, regulatory clarity and shareholder alignment remain critical to its successInside Korea’s Next Fintech Pivot: What Naver – …^[2] Reports: Internet giant Naver may merge with crypto …^[6].