Korea Floats Market Makers After JPYC Briefly Forgets What a Peg Is

South Korea's Financial Services Commission said it is considering a market-making system for digital assets, days after a yen-pegged stablecoin listed on the country's largest exchange briefly traded for more than four times its intended value. Upbit opened trading of JPYC on Sept. 17, with the market opening at 12 Korean won per JPYC before reaching a high of 37.6 won roughly an hour later, a spike attributed to limited liquidity on the platform.

"We will also review the need to introduce systems such as market-making activities to increase the efficiency and stability of the digital asset landscape," Yoo Young-joon, director of digital finance policy at the FSC, said at a conference in Seoul on Monday, Digital Asset reported. "There were also criticisms that user losses occurred from the price surge after the JPYC listing, so demands for discipline in this area are expanding."

South Korea's Virtual Asset User Protection Act does not currently include an exemption for market-making from its market manipulation provisions, which has blocked market makers from providing liquidity in domestic crypto markets. Yoo's comments suggest the FSC could revisit that position. In a 2024 peer-reviewed paper in the Seoul Law Review, KB Securities researcher Lee Min Jung wrote that regulators at the time rejected crypto market making out of manipulation concerns, though she argued a carve-out could be considered once the market stabilizes.

Researchers had already flagged the liquidity gap before the JPYC episode. A paper by Yoonyoung Choi of the Korbit Research Center said South Korea's domestic crypto market had been experiencing "serious liquidity problems" due to the absence of a formal market maker system, citing price discrepancies such as the so-called Kimchi premium as evidence of inefficiency.

The potential framework is part of a broader push to regulate the country's crypto sector. In July, the FSC said it planned to introduce a consolidated Digital Asset Basic Act covering stablecoins and the wider market, including rules for digital asset businesses, exchanges, disclosures and internal controls. Lawmakers have not yet settled key details, including the treatment of won-denominated stablecoin issuers.