South Korea's Upbit to merge under internet giant Naver via stock swap: report

South Korean internet giant Naver is absorbing Upbit, the country's largest cryptocurrency exchange, according to local news outlet Donga Ilbo.

Naver plans to have its payment subsidiary, Naver Financial, undertake a comprehensive share exchange with Upbit's parent company Dunamu, making Dunamu a 100% subsidiary of Naver Financial, the Thursday report said.

The share exchange aims to unify the corporate structure, with one company becoming the parent and the other a wholly owned subsidiary. Unlike a traditional merger, both entities will remain legally intact after the transaction.

A representative for Dunamu declined immediate comment, stating they were fact-checking the report.

Meanwhile, the local media report said both companies have established dedicated task force teams to finalize the share swap. Under the deal, Naver Financial would issue new shares in exchange for the stakes currently held by Dunamu shareholders.

Naver, founded in 1999, has grown to become one of South Korea's largest corporations by operating the country's dominant search engine. Its subsidiary Naver Financial provides an extensive range of financial services such as mobile payment platform Naver Pay, loans, insurance, and investment products.

Regulatory developments in Korea

The report comes amid South Korea's ongoing efforts to promote the local cryptocurrency sector by setting a clear regulatory framework. The country has recently focused on efforts to formalize a Korean won-pegged stablecoin market, in an aim to strengthen its monetary sovereignty in the age of digital finance.

On Wednesday, the ruling Democratic Party of Korea established a digital asset task force, dedicated to laying the legislative groundwork for cryptocurrencies. The task force said it aims to pass the won stablecoin legislation by year-end.

The reported move by Upbit and Naver to strengthen ties may be a strategic effort to prepare for crypto regulatory developments, particularly around local currency stablecoins, and could potentially allow Naver to integrate Upbit's crypto infrastructure into its financial services.