Naver-Dunamu deal faces final antitrust review over competition concerns

South Korea's antitrust watchdog has entered the final stage of its review of Naver Financial's proposed acquisition of Dunamu, operator of cryptocurrency exchange Upbit, warning the deal could restrict competition in digital finance and stablecoin markets.

The Fair Trade Commission said Tuesday its secretariat had submitted a review report to the agency's full panel, recommending conditional approval after examining revised remedies offered by the companies.

The merger would bring together Korea's leading online payments provider and largest cryptocurrency exchange, creating a digital finance platform valued at about 20 trillion won ($14.9 billion).

The full panel will decide whether to approve the deal, impose conditions or block it, with a decision expected by year-end, nearly a year after the companies filed for approval.

The examiner identified 10 markets potentially affected by the transaction, including online payments, cryptocurrency exchanges, search, shopping and financial data services.

Of 12 ways the companies' businesses could overlap or interact, the review found competition concerns in 10. Their direct overlaps in stock investment platforms and online secondhand marketplaces were deemed unlikely to substantially restrict competition under the regulator's safe-harbor criteria.

Notably, the review extended to Korea's prospective market for won-denominated stablecoins, despite the absence of an established regulatory framework for their issuance.

The examiner identified four potential sources of competitive harm involving stablecoins, including links between stablecoin issuance and cryptocurrency trading, and between cryptocurrency trading and online payments.

The assessment reflects concerns that the combined company could gain an advantage by linking Naver Pay's extensive payment network with Upbit's cryptocurrency exchange if won-backed stablecoins become legally available.

"I don't recall us ever assessing competition concerns in a market that had yet to form," said Jeon Seong-bok, director general of the FTC's Business Transactions and Merger Review Bureau.

"But a bill on won-denominated stablecoins had been introduced, and the companies' submissions indicated that entering the market was a priority for them. That's why we assessed the potential impact on competition."

Kim Hye-seon, head of the FTC's merger review division, said the agency also gathered views from competitors. "We concluded that leaving the market out simply because it had yet to form could itself affect how competition develops," she said.

The FTC declined to disclose the companies' proposed remedies, citing their preliminary status and potential impact on competitors.

Jeon said possible conditions could include requiring the combined company to treat competitors equally or restricting certain business practices. The full panel could modify the proposed measures if it determines they are insufficient to address competition concerns.

Under the proposed all-stock transaction, Dunamu shareholders would receive approximately 2.54 Naver Financial shares for each Dunamu share, making Dunamu a wholly owned subsidiary of Naver Financial.

The merger could eventually allow the combined company to integrate won-backed stablecoin payments into Naver's shopping platform, offering merchants an alternative to conventional card networks, subject to regulatory approval.

In a joint statement, Naver and Naver Financial said they had provided the requested information throughout the review and would continue cooperating with the FTC.

They argued that combining Naver's AI and platform capabilities, Naver Financial's payments and financial services, and Dunamu's blockchain technology could create overseas growth opportunities and strengthen Korea's digital asset industry.

The FTC's full panel will make the final decision, including whether the proposed remedies sufficiently address the identified competition risks.