[Edaily Reporter Kim Hyun-ah ] Naver’s (NAVER(035420)) acquisition of Dunamu (operator of Upbit) as a wholly-owned subsidiary is one of the largest mergers and acquisitions (M&A) in South Korea’s ICT and fintech sectors this year. It also holds significant industrial implications, as it could give rise to a new ecosystem where digital assets, platforms, and artificial intelligence (AI) converge.

However, this major M&A deal nearly ran into an unexpected regulatory roadblock during the process. This was because a past violation of the Fair Trade Act—related to the operation of a real estate platform, which is of a different nature than the virtual asset business—emerged as a variable in the review of the major shareholder’s eligibility.

Fortunately, the Presidential Committee on Regulatory Rationalization intervened during the legislative review process, paving the way for institutional reforms. Although the procedure to amend the enforcement decree remains, this case stands as a prime example of how a single provision in financial regulations and a single exception clause can have a massive impact on the industry’s future and large-scale investments.

Violations of the Fair Trade Act and Major Shareholder Eligibility… The Key Is “Proportionality”

Naver is currently undergoing an appeal trial for a Fair Trade Act violation case stemming from its past operation of “Naver Real Estate,” in which it is accused of obstructing the provision of verified property listing information to competitors.

Of course, it is a necessary procedure for financial authorities to examine potential violations of the Fair Trade Act when assessing major shareholder eligibility, in order to maintain market order and protect investors. The problem lay in the rigidity of the original draft amendment to the Enforcement Decree of the Act on the Regulation of Specific Financial Transactions (Specific Financial Transactions Act), which was proposed by the Financial Services Commission.

The original draft was designed to apply grounds for disqualification of major shareholders uniformly, without considering factors such as the application of joint liability provisions for corporations or the severity of violations. Had it been implemented as is, Naver would likely have faced significant legal uncertainty during the acquisition of Dunamu due to the risk of fines related to past platform operations that were not directly related to its virtual asset business.

In essence, the legislative intent to prevent money laundering and enhance trust in the virtual asset market could have led to unintended consequences—such as industry restructuring and a decline in investment—due to the absence of detailed exceptions.

The law does not treat all violations equally. Criminal and administrative laws, as well as financial laws, take into account the severity of the violation, the presence of intent, and the extent of harm to the public interest. This is why regulations must operate not only based on their purpose but also in accordance with the principle of proportionality.

“Restoring Equity,” Not Special Treatment

Fortunately, the Regulatory Rationalization Committee has addressed this issue.

The Korea Fintech Industry Association and the Digital Asset Exchange Joint Council (DAXA) pointed out that the absence of exception provisions in the Special Financial Transactions Act alone could create an issue of equity, and the Commission, after hearing the opinions of the Financial Intelligence Unit (FIU), recommended revising the system to align with the standards of the Capital Markets Act.

This was not a request for preferential treatment for specific companies. Existing financial laws, such as the Banking Act and the Capital Markets Act, already include provisions for joint liability of legal entities and exceptions for minor violations. These are legislative balancing mechanisms designed to maintain financial order without unnecessarily stifling business activities.

Conversely, if only the Special Financial Transactions Act lacks such exceptions, it would result in the virtual asset industry being subject to relatively stricter standards even within the same financial regulatory framework. It is reasonable to view the Regulatory Rationalization Committee’s recommendation not as a request for preferential treatment, but as a proposal to restore equity and balance within the legal system.

Regulation should be a sophisticated yardstick, not a weapon

. This case clearly illustrates what our regulatory system must consider moving forward.

As new industries emerge, regulation becomes increasingly important. This is especially true in sectors like virtual assets, where investor protection and market transparency are key. However, regulation must remain faithful to its purpose without losing its sense of proportionality. This is because applying a one-size-fits-all standard without considering the severity of violations or the context of each case could stifle both industry innovation and investment.

The world has now entered a new era of competition where AI, digital assets, and financial platforms are converging. Platform companies are creating new industrial ecosystems by combining AI with financial services. The merger between Naver and Dunamu is also viewed as a significant endeavor—going beyond a simple corporate acquisition—that can enhance the competitiveness of Korea’s digital finance industry.

In the recent controversy over the Enforcement Decree of the Special Financial Transactions Act, the Regulatory Rationalization Committee sought to address more than just a single M&A deal. The goal was to restore balance to the regulatory framework so that one-size-fits-all regulations—which are out of step with industry realities—would not hinder innovation.

The purpose of regulation is not to bring companies down, but to maintain market trust. Trust is not built through strictness alone. Sophisticated regulations—which are strict where necessary and allow for reasonable exceptions where appropriate—foster both innovation and soundness.

The saying “the devil is in the details” is particularly apt when designing regulations. Good regulations should not be a sword aimed at an industry, but rather a yardstick that accurately measures risk. This is precisely the most important lesson that the recent controversy over the Enforcement Decree of the Special Financial Transactions Act has left for our legislative and regulatory policies.