Naver, Kakao race to dominate Korea's won-backed stablecoin market

As the National Assembly resumes discussions on a basic digital assets law, expectations are growing for the institutionalization of a won-backed stablecoin. Naver and Kakao have moved to secure early footholds in the market by forging alliances with virtual asset exchanges, banks and global stablecoin operators. However, a Korea Fair Trade Commission merger review and a pending revision to the enforcement decree of the Act on Reporting and Using Specified Financial Transaction Information — commonly known as the Special Financial Information Act — remain key variables for both companies' plans.

Stablecoins are regarded as a critical payment instrument in on-chain environments where tokenized real-world assets and similar products are traded, enabling instant settlement around the clock.

In the global market, Tether and Circle together command roughly 90 percent of the market, backed by wide distribution networks. Industry observers say the success of a won-backed stablecoin will hinge not merely on issuance but on how broadly it can be embedded in everyday services — payments, remittances and commerce.

Both Naver and Kakao are accelerating their push for market leadership, leveraging prepaid balance systems and payment infrastructure as their primary advantages.

Naver is pursuing a comprehensive share swap with Dunamu, the operator of Upbit, South Korea's largest virtual asset exchange. The plan is to bring Dunamu under Naver Financial as a subsidiary, combining Naver's search and commerce infrastructure with Naver Pay's payment network and Dunamu's blockchain technology.

Hana Bank has also acquired a 6.55 percent stake in Dunamu, becoming its fourth-largest shareholder, and is contributing to the construction of a value chain spanning stablecoin issuance, distribution and payment.

"Hana Financial will build a full value chain in the stablecoin market through its partnership with Dunamu," said Jo A-hae, a researcher at Meritz Securities. "A structure is possible in which Hana Bank handles stablecoin issuance and custody, Dunamu manages distribution and trading networks, Hana Securities covers real-world asset financial products, and Hana Card takes charge of payments and everyday financial services."

Kakao is consolidating the capabilities of Kakao Pay and Kakao Bank. The company has proposed forming a won-backed stablecoin consortium with major commercial banks to broaden its collaborative reach, while also signing an MOU with global stablecoin issuer Circle to lay the groundwork for global infrastructure.

Despite the fierce competition for market leadership, the regulatory hurdles ahead are formidable.

The merger between Naver Financial and Dunamu has been delayed, with the share swap completion date pushed back to year-end as the Fair Trade Commission's monopoly review drags on.

A proposed revision to the Special Financial Information Act enforcement decree, being pursued by financial regulators, is another variable. The revision would restrict the eligibility of major shareholders of virtual asset businesses if they have been fined or more severely penalized for violations of financial-related laws. Whether that provision would apply to Naver — which has a prior record of violating the Fair Trade Act — is expected to affect the progress of the merger.

With the National Assembly's Political Affairs Committee completing its second-half formation and formally resuming deliberations on the basic digital assets law, a tug-of-war between regulators and the industry over the qualifications for stablecoin issuers and the criteria for separating issuance from distribution is expected to intensify.

"Now is the time to focus less on short-term price movements in virtual assets and more on the expansion of business models at payment and settlement infrastructure companies and their integration with traditional finance," said Hong Jin-hyeon, an analyst at Samsung Securities.