Kakaopay’s Stock Decline
On June 27, shares of Kakaopay, a prominent player in South Korea’s digital payments sector, experienced a significant decline, plunging nearly 17% upon the resumption of trading after a temporary suspension by the Korea Exchange. This suspension was part of the exchange’s precautions against extreme stock fluctuations, which had already led to a prior halt just days earlier. This earlier interruption was prompted by an unexpected surge in stock value, where Kakaopay shares had skyrocketed by around 50% within a two-day span. Over the course of the last month, the stock price has seen a remarkable tripling, largely driven by optimism surrounding Kakaopay’s potential entry into the stablecoin market.
Market Analysts’ Concerns
The Korea Exchange designated Kakaopay as an “investment risk” due to this volatility, prompting market analysts to exercise caution. Shawn Oh, a trader with NH Investment & Securities Co. in Seoul, commented on the situation, asserting that the stock’s performance had become disconnected from its underlying fundamentals, indicating that a correction was imminent.
Kakaopay’s Strategic Moves
In a related development, Kakaopay has taken proactive steps toward establishing a foothold in the stablecoin market, as revealed by its recent submission of 18 trademark applications. Notably, KakaoBank, another significant affiliate within the Kakao Group, has also filed for trademarks related to stablecoin operations, encompassing a variety of services such as cryptocurrency software and financial transactions. These filings are seen as a strategic move in response to the evolving landscape of stablecoins.
A representative from KakaoBank remarked, “These trademark applications reflect our intention to strategically engage with the developments occurring within the stablecoin sector,” and assured that they are vigilant regarding shifts in legal frameworks and market conditions.
Legislative Developments
This backdrop aligns with ongoing dialogues in South Korea’s National Assembly concerning the Digital Asset Framework Act, a legislative effort that, if passed, would pave the way for the issuance of won-pegged stablecoins and allow major financial entities, including KakaoBank and Kakaopay, to operate in this segment. However, caution has been sounded by the Bank of Korea regarding the widespread adoption of stablecoins, highlighting potential risks such as market instability linked to mass withdrawals and disruptions in the foreign exchange market.
Moreover, the Bank for International Settlements has also raised concerns, stating that stablecoins should not be viewed as replacements for traditional currency and their prospective role within the financial ecosystem remains uncertain.
