Naver's Acquisition of Upbit: Reshaping South Korea's Crypto Landscape

Naver Set to Control Upbit: What It Means for South Korea's Crypto Market

As the crypto world's attention focuses on Seoul during Korea Blockchain Week (KBW), news has emerged that Naver, South Korea's internet giant, is planning a share swap with Dunamu, the parent company of Upbit. If this acquisition goes through, Naver will effectively control South Korea's largest cryptocurrency exchange, marking a significant shift in the country's digital financial landscape.

The South Korean crypto market is experiencing unprecedented activity, with user accounts at the top five exchanges exceeding 9.6 million, representing approximately 18.7% of the total population. Upbit dominates the market with a market share of over 80%, and its daily trading volume often surpasses US$10 billion. The Korean won has become the second-largest fiat currency for crypto trading globally, trailing only the US dollar.

This potential acquisition did not come out of the blue. In July, Naver and Dunamu announced a partnership to develop a Korean won-backed stablecoin. In September, Naver acquired 70% of Securities Plus Unlisted, a securities trading platform owned by Dunamu. These moves suggest a comprehensive acquisition strategy.

Naver: A South Korean Internet Powerhouse

Naver is South Korea's largest internet company, with a market capitalization of approximately US$50 billion. It is often compared to a combination of Google and Tencent due to its dominance in search engines and the construction of a vast online ecosystem. Although Naver may not be familiar to many Western users, LINE, the popular messaging app owned by Naver, is widely known in Asia.

Naver's business empire extends beyond that. Naver Financial, its fintech arm, operates Naver Pay, South Korea's largest mobile payment platform, with 30 million users. From online shopping to offline payments, Naver Pay has become an integral part of the daily lives of South Koreans.

By acquiring Upbit, Naver aims to integrate its financial services, offering users a full suite of financial services, from fiat currencies to cryptocurrencies. This integration could extend beyond South Korea, reaching 200 million overseas users through LINE.

Korean Conglomerates Embrace Web3

Naver's acquisition of Upbit is not an isolated case. It reflects a broader trend of Korean conglomerates entering the crypto market. Kakao, another South Korean internet giant, has been active in the space since 2019, launching the Klaytn public blockchain and promoting the Klip wallet through its KakaoTalk app with 50 million users. Samsung is also exploring blockchain technology through crypto wallets embedded in its smartphones and blockchain solutions for enterprise clients.

A Crypto Market Focused on Corporations

The entry of Korean conglomerates into the crypto market is characterized by significant investments, close coordination with government policies, and the construction of independent ecosystems. This approach leads to increased market concentration, with Upbit and Bithumb dominating the majority of South Korea's trading volume.

The Global Shift Towards Institutional Crypto

The dominance of large corporations in the crypto market is not unique to South Korea. Globally, the crypto market is undergoing a transformation from grassroots ventures to corporate domination. Middle Eastern sovereign wealth funds are actively investing in crypto projects, and traditional financial institutions in the United States are embracing crypto as an asset class. In Japan, large corporations are taking a more conservative approach, making defensive investments in crypto.

These global trends reflect a growing understanding of crypto as a legitimate asset class. As large institutions invest in crypto, the market is evolving into a two-tiered structure, with a regulated, centralized market dominated by institutions and an experimental, decentralized market driven by the community.