Upbit, Naver stock-swap deal faces second delay amid proposed crypto law debate

South Korea's Naver Financial and Upbit parent company Dunamu announced on Monday that their stock swap transaction has been pushed back to Dec. 31, amid the changing local regulatory landscape.

This is the second time the deal was delayed. In March, the two announced that they were pushing back the transaction date from June 30 to Sept. 30. The delay was stipulated in a filing on Dart, South Korea's official electronic disclosure system for corporations. 

The transaction was first announced last year as Naver Financial, the financial services subsidiary of local IT giant Naver, officially confirmed its merger deal with Dunamu. The exchange ratio is 2.5422618 shares of Naver Financial for every one share of Dunamu.

To facilitate this transaction, Naver Financial said it plans to issue 87.56 million new shares, worth approximately 15.13 trillion won ($9.9 billion). A share of Naver Financial was priced at 172,780 won ($113.40).

Through the transaction, the two companies aim to secure future growth momentum driven by digital assets, with industry watchers expecting Naver to integrate Upbit's crypto infrastructure into its massive domestic financial services network.

While the two have not announced specific business plans, it was previously reported that the companies would invest in the combination of AI and blockchain.

Regulatory landscape

In the latest filing, the two companies noted that the state of progress in the regulatory process, registration with authorities, and approval of the changes in corporate structure may delay the transaction or potentially nullify the agreement.

The companies also mentioned that the upcoming Digital Asset Basic Act, a key legislation for the regulation of the crypto sector in South Korea, is currently being developed, and that the contents of the legislation may impact the progress or outcome of the stock exchange.

There is an ongoing debate about a potential clause in the act that would limit the amount of stake a major shareholder can hold in a domestic cryptocurrency exchange — 20% is being discussed as the baseline. This would also apply to existing companies' structures, including Upbit's.

While South Korea's financial authorities say the limit could alleviate oligopoly in the local exchange market and bring transparency to corporations in the digital asset space, lawmakers and industry participants argue that it is unconstitutional and infringes on companies' right to engage in economic activity.