South Korea’s antitrust regulator has moved to the final stage of reviewing the acquisition of Dunamu, which operates the Upbit cryptocurrency exchange, by payment services operator Naver Financial. The secretariat of the Fair Trade Commission submitted a report for consideration by the agency’s full commission and recommended conditionally approving the deal after assessing the companies’ updated commitments, Korea Herald reports.
The deal could combine the country’s largest online payments provider and its largest cryptocurrency exchange, creating a digital financial platform valued at approximately 20 trillion won, or $14.9 billion. The full commission must decide whether to approve the transaction, impose conditions on it, or block it. A decision is expected by the end of the year, nearly a year after the companies submitted their application for approval.
Under the terms of the proposed share-swap transaction, Dunamu shareholders are to receive approximately 2.54 Naver Financial shares for each Dunamu share. Once the deal is completed, Dunamu will become a wholly owned subsidiary of Naver Financial.
Risks for digital finance
The Fair Trade Commission believes the transaction could restrict competition in digital finance markets. The review covered 10 potentially affected segments, including online payments, cryptocurrency exchanges, search, online shopping, and financial data services.
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The regulator analyzed 12 instances of overlap or interaction between the companies’ businesses and identified competitive risks in 10 of them. At the same time, direct overlap in stock investment platforms and online marketplaces for used goods is unlikely to significantly restrict competition, according to the agency.
Assessment of the stablecoin market
The review also concerned the not-yet-formed market for won-denominated stablecoins, although there is currently no regulatory framework for their issuance in the country. Jeong Seong-bok, a representative of the regulator, said that a bill on such stablecoins has already been introduced and that entering this market is identified as a priority in the companies’ documents.
The assessment identified four potential sources of adverse effects on competition, including links between stablecoin issuance and cryptocurrency trading, as well as between cryptocurrency trading and online payments. The regulator fears that the combined entity could gain an advantage by linking the Naver Pay network with the Upbit crypto exchange if the issuance of won-denominated stablecoins is permitted.
The Commission did not disclose the measures proposed by the companies because of their preliminary status. Possible conditions mentioned included a requirement to treat competitors equally or restrictions on certain business practices. Naver and Naver Financial said they had provided the regulator with the requested information and would continue to cooperate with it.
