South Korea's Financial Services Commission (FSC) said at a conference in Seoul on Monday that it is considering introducing a market making system for digital assets after the stablecoin JPYC, pegged to the Japanese yen, surged on Upbit from 12 to 37.6 Korean won per JPYC within an hour on September 17 — more than four times above the market value.

User Protection Law Does Not Exempt Market Makers

Market making in crypto assets is effectively restricted in the country by rules on market manipulation: the current Virtual Asset User Protection Act does not provide exemptions for such activities, which limits liquidity providers. According to Yoo Young-joon, Director of the FSC's Digital Finance Policy Department, the regulator will assess the need for mechanisms to improve market efficiency and stability amid criticism over user losses during the JPYC listing.

JPYC Spike on Upbit Linked to Liquidity Shortage

JPYC trading on Upbit began on September 17 at 12 KRW per token and reached 37.6 KRW within an hour. The surge was attributed to limited liquidity on the platform, prompting calls for stricter "discipline" in this segment of the market.

Unified Digital Asset Law in Development

The potential introduction of a market making system is being discussed as part of broader regulatory preparations. In July, the FSC announced plans for a consolidated Digital Asset Basic Act, which will cover stablecoins and the wider crypto market, including rules for businesses and exchanges, disclosures, and internal controls. However, decisions on several key issues, including for stablecoin issuers denominated in won, have not yet been made.

Experts Debate Carve-Out for Market Makers

Researchers have previously highlighted both the risks and benefits of formal market making. In a 2024 peer-reviewed paper in Seoul Law Review, Lee Min Jung of KB Securities noted that allowing market making could be interpreted as manipulation and may be premature; however, an exemption could be considered as the market stabilizes. Research by Yoonyoung Choi (Korbit Research Center) described "serious liquidity problems" caused by the lack of a formal system, leading to price discrepancies and high volatility; the "kimchi premium" was cited as an example.