South Korea's largest exchange Upbit will be acquired by Naver, is the crypto market entering the "chaebol era"?

Author: Deep Tide TechFlow

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Korea Blockchain Week (KBW) is in full swing in Seoul, and the eyes of crypto practitioners are focused on South Korea.

At this point in time, according to a report by the South Korean media Dong-A Ilbo on Thursday, South Korean internet giant Naver plans to conduct a share swap with Upbit's parent company Dunamu, which will make Dunamu its subsidiary.

This means that South Korea's largest internet company will control the country's largest cryptocurrency exchange.

Currently, the Korean cryptocurrency market is indeed in an unprecedented active period.

The user accounts of the five major exchanges in South Korea have surpassed 9.6 million, accounting for about 18.7% of the total population. Among them, Upbit holds over 80% of the market share, with daily trading volumes often exceeding 10 billion dollars. The Korean won has become the second largest fiat currency for cryptocurrency trading globally, after the US dollar.

At the beginning of this month, at the Upbit Developer Conference, Dunamu just released its Web3-based blockchain GIWA Chain and GIWA Wallet; this Layer 2 based on OP Rollup technology showcases Upbit's technological ambition.

The transaction for this share swap is not without warning.

In July of this year, both parties announced a partnership to develop a Korean won stablecoin; in September, Naver acquired 70% of the shares of the securities trading platform under Dunamu. It now appears that these are all preludes to a full acquisition.

Dunamu's current valuation is about 8.26 trillion won (6 billion USD). If the deal goes through, it will be the largest merger and acquisition in the history of South Korea's cryptocurrency industry.

Who is Naver? The Korean version of Google + Tencent

Naver is the largest internet company in South Korea, with a market value of about 50 billion dollars.

In South Korea, Naver's position is comparable to that of Google and Tencent combined. It not only monopolizes 70% of the search engine market but also builds a vast internet ecosystem through its subsidiaries.

Most Chinese users may not be familiar with the name Naver, but they definitely know LINE. LINE is a subsidiary of Naver, with over 200 million users in Japan and Southeast Asia, making it one of the largest instant messaging software in Asia.

Naver's business scope goes far beyond this.

Naver Financial is its fintech subsidiary, and Naver Pay, under it, is the largest mobile payment platform in South Korea, with 30 million users, covering almost more than half of the population of South Korea. From online shopping to offline payments, from transfers to wealth management, Naver Pay has deeply integrated into the daily lives of South Koreans.

Similar to other global tech giants, Naver attracts users through its core platform (search engine) and then continuously expands its services, creating an ecosystem that is hard for users to leave.

In the financial sector, Naver has been accelerating its布局. In 2019, Naver Financial was established, in 2020, it launched digital banking services, and in 2024, it obtained a securities brokerage license. In September of this year, Naver Pay acquired a 70% stake in Securities Plus Unlisted, a subsidiary of Dunamu, for 68.6 billion KRW.

Acquiring Upbit now is the final piece of the puzzle in Naver's financial landscape. Once completed, Naver will own:

Payment Tool (Naver Pay)

Securities Plus

Cryptocurrency Trading (Upbit)

Upcoming Korean Won Stablecoin

This vertical integration allows Naver to provide users with a full-chain financial service from fiat to cryptocurrency. More importantly, with LINE's 200 million overseas users, this system has the potential to expand beyond South Korea and cover the entire Asian market.

Korean Characteristics: When Chaebols Meet Web3

Naver's acquisition of Upbit is not an isolated case. This is one of the latest manifestations of large South Korean enterprises fully entering the cryptocurrency market.

Kakao's layout began earlier. In 2019, it launched the public blockchain Klaytn and promoted the Klip wallet through KakaoTalk's 50 million users. The KLAY token currently ranks in the top 50 in market capitalization worldwide. In September this year, Klaytn announced a merger with the Finschia chain developed by LINE, forming a new Kaia chain.

Samsung starts with hardware. Since the Galaxy S10 in 2019, Samsung smartphones have included a built-in cryptocurrency wallet feature. Samsung SDS also provides blockchain solutions for enterprise clients. Although Samsung does not directly operate an exchange, its layout at the infrastructure level is also quite clear.

Traditional financial institutions are also accelerating their entry into the market. In August this year, eight banks, including KB Financial and Shinhan Financial, announced a joint development of a Korean won stablecoin project. This timing is exactly one month after Naver and Dunamu announced their stablecoin collaboration.

This pattern dominated by large enterprises is not surprising in South Korea.

The South Korean economy has long been dominated by large corporate groups, with the top ten chaebols contributing a major portion of South Korea's GDP. When new industries emerge, these large companies typically enter quickly and establish a dominant position.

Dunamu was established in 2012 and launched Upbit in 2017. In a market environment like South Korea, it is not easy for an independent company to grow to a valuation of 82.6 trillion won. Choosing to join the Naver system now may be a strategic choice made in response to increasingly fierce competition.

From past information, there are several characteristics of large South Korean enterprises entering the cryptocurrency market:

First, the resource investment is huge and rapid. Kakao took about a year from deciding to develop blockchain to the launch of the Klaytn mainnet. Naver took just over two months from announcing the stablecoin collaboration in July to now preparing for a full acquisition of Dunamu.

Second, it is highly coordinated with government policy. This year, the South Korean government suspended its central bank digital currency project and instead supported the private sector in developing stablecoins. The timing of this policy shift coincides with major companies accelerating their efforts in the crypto business.

Third, each builds an independent ecosystem. Naver has its own payment system, Kakao has its own blockchain, and the banking alliance wants to promote its own stablecoin. Each group is building a relatively closed system, and the migration costs for users between different ecosystems are very high.

The result of this model is that market concentration is increasing.

According to public data, Upbit once accounted for about 73% of the trading volume in South Korea, while Bithumb accounted for about 25%, with the remaining market share divided among Coinone, Korbit, and others. With Upbit being acquired by Naver, the market concentration may further increase.

Dominated by conglomerates, rapidly advancing, and with a focus on practicality, South Korea has its own development model for the cryptocurrency industry.

You might think this is a bit centralized, but the Koreans seem not to care. Nearly 20% of Koreans participate in crypto trading, and they are more concerned about convenience and security.

The “New Financial Tycoon Era” of the global cryptocurrency market

Not just in South Korea, but globally, the cryptocurrency market is currently experiencing a shift from grassroots entrepreneurship to monopoly by giants.

First, let's look at the Middle East. Binance has received investment from the Abu Dhabi sovereign wealth fund this year, although the specific amount has not been disclosed, but market rumors suggest it is in the billions of dollars. The Dubai royal family supports multiple crypto projects, aiming to turn Dubai into the “global crypto capital.” Saudi Arabia's Public Investment Fund (PIF) is also actively investing in blockchain.

The United States is taking a different path: traditional finance is gradually swallowing the cryptocurrency market, ultimately turning it into another asset class.

As the government's attitude towards the cryptocurrency industry becomes increasingly friendly, major institutions on Wall Street are starting to shift. BlackRock has launched a Bitcoin ETF, Fidelity is offering crypto custody, and Goldman Sachs has begun crypto trading…

Although Coinbase is still relatively independent, its institutional business share is increasing, and retail investors are becoming less of the main players in trading.

The situation in Japan is more subtle. Rakuten acquired a cryptocurrency exchange as early as 2018, and SBI Holdings operates one of Japan's largest crypto platforms. However, unlike the aggressive moves of South Korean conglomerates, the cryptocurrency strategies of Japanese large enterprises are relatively conservative, resembling more of a defensive investment.

Behind these different models lies a reflection of the varying understandings of cryptocurrency across regions, but the outcome seems to be similar: independent crypto enterprises are facing a shrinking space for survival, while the proportion of institutional holdings in attractive crypto assets is increasing.

For example, large CEX and crypto infrastructure companies (such as stablecoins), from the perspective of compliance and attracting more incremental users, either gradually accept large investments from traditional capital or strive to go public in the capital markets.

BTC and ETH have become sought-after assets in the play of corporate crypto treasury.

Perhaps a more accurate way to describe this phenomenon is that the crypto market is becoming stratified.

The upper layer is an institution-led, compliant, centralized market. There are ETFs, custodial services, and licensed exchanges here; the lower layer is a community-driven, experimental, decentralized market. There are Perp DEX and Meme here.

The mainstream market is controlled by large capital, serving ordinary users and institutions; the fringe market remains decentralized, continuing technological innovation and experimentation.

As for whether this phenomenon is good or bad, there may not be a simple answer.