South Korea floats market-maker role after JPYC trades 4x peg on Upbit
Regulators weigh legalizing crypto market making after a yen-backed stablecoin spiked on Upbit, reviving a long-running debate over liquidity and manipulation rules.
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South Korea's financial regulator is reconsidering a ban on crypto market making after JPYC, a yen-pegged stablecoin, surged to four times its intended value shortly after listing on major exchange Upbit this month.
In a Monday conference in Seoul, Yoo Young-joon, director of digital finance policy at the Financial Services Commission (FSC), said the agency would "review the need to introduce systems such as market-making activities to increase the efficiency and stability of the digital asset landscape," according to Digital Asset. He noted that "criticisms that user losses occurred from the price surge after the JPYC listing" have amplified calls for discipline.
JPYC opened trading on Upbit on Sept. 17 at 12 Korean won per token and hit 37.6 won within an hour — more than four times its pegged value — before settling. The spike was blamed on thin order books, leaving buyers to chase a scarce supply.
South Korea's Virtual Asset User Protection Act currently treats market making as a form of market manipulation, with no exemption for liquidity providers. That has effectively barred professional market makers from operating in the domestic crypto market, a gap the FSC now appears willing to revisit.
The debate over a market-maker carve-out is not new. In a 2024 paper in Seoul Law Review, KB Securities researcher Lee Min Jung said regulators had rejected the practice because it could be construed as manipulation. While Lee argued that introducing market makers prematurely could invite abuse, she suggested a carve-out might be viable once the market matures.
Other researchers have pushed for a formal framework for years. Yoonyoung Choi of the Korbit Research Center wrote that the absence of market making has left the domestic market with "serious liquidity problems," fueling price distortions and erratic swings. Choi pointed to the Kimchi premium — the persistent gap between crypto prices on South Korean exchanges and global venues — as evidence of the inefficiency.
The potential policy shift comes as Seoul builds a broader regulatory edifice for digital assets. The FSC announced in July plans for a consolidated Digital Asset Basic Act that would govern stablecoins, exchanges, disclosures and internal controls.
Lawmakers have yet to finalize key elements of that legislation, including rules for won-denominated stablecoin issuers, leaving the timeline for any market-making reform uncertain.
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