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South Korea’s Financial Services Commission is seriously weighing whether to bring market makers into the country’s crypto sector. The trigger: a yen-pegged stablecoin called JPYC that went completely haywire on Upbit earlier this month.
JPYC listed on Upbit on September 17. It opened at 12 Korean won per token. Within an hour, it hit 37.6 won — roughly four times its pegged value. The culprit, pretty much everyone agrees, was thin liquidity. Not a hack, not a rumor. Just an empty order book and a coin that had nowhere to go but up. Users who bought near the top got burned, and the backlash landed squarely on regulators.
That’s where the FSC comes in.
FSC Weighs Market-Making Rules
Yoo Young-joon, director of digital finance policy at the FSC, said the incident has pushed the commission to take a harder look at whether a formal market-making system could stabilize prices and improve efficiency in the digital asset market. It’s a real policy shift in tone, even if nothing’s been decided yet.
Right now, South Korea’s Virtual Asset User Protection Act basically bans market making. The concern has always been manipulation — that a designated market maker could push prices around and profit at retail traders’ expense. That fear isn’t crazy. It’s the same debate that’s played out in traditional equity markets for decades, and crypto’s opacity makes it even thornier.
But the JPYC episode kind of flipped the argument. If you don’t have market makers, you get price gaps that are just as damaging. A stablecoin trading at 4x its peg isn’t stable. It’s a trap for anyone who doesn’t catch the move in time.
Yoonyoung Choi from the Korbit Research Center made the same point in a research paper, noting that the absence of a formal market-maker system has contributed to significant price discrepancies and volatility in South Korea’s crypto market. It’s a structural problem, not a one-off glitch. The JPYC spike was dramatic enough to force the conversation into the open, but the underlying liquidity issue has been there for a while.
South Korea’s crypto market has its own well-documented quirks. The Kimchi premium — the gap between Korean crypto prices and global prices — has come and gone over the years, but it never fully disappears. Capital controls, limited arbitrage pathways, and concentrated retail trading all feed into it. Market makers, in theory, could narrow those gaps. Whether regulators trust them enough to try is a different question.
Lee Min Jung from KB Securities weighed in on this in a 2024 paper, saying regulators were cautious about crypto market making because of manipulation fears, but that a reconsideration might be possible if market conditions stabilized. Seems like conditions didn’t exactly stabilize on their own.
Digital Asset Basic Act Still Has Gaps
The FSC’s market-maker debate doesn’t happen in a vacuum. South Korea has been building toward a broader regulatory framework for crypto for a while now, and the proposed Digital Asset Basic Act is the centerpiece. It’s meant to cover stablecoins, digital asset businesses, exchanges — basically the whole ecosystem.
But key pieces aren’t locked down yet. Rules for won-denominated stablecoin issuers, for instance, are still unresolved. That’s not a small detail. If South Korea wants to regulate stablecoins seriously, it needs clear issuance standards, reserve requirements, and redemption rules. None of that is finalized.
The JPYC incident adds urgency. JPYC is yen-denominated, not won-denominated, but the mechanics of what happened — a pegged asset trading wildly off its peg because nobody was there to hold the spread — applies just as much to any future Korean won stablecoin. If regulators can’t prevent that with JPYC, they probably can’t prevent it with a domestic stablecoin either, at least not without structural market changes.
So the market-maker question and the stablecoin question are kind of the same question. You can write all the issuance rules you want, but if there’s no liquidity infrastructure to keep a peg intact under stress, the rules don’t do much.
The FSC is aware of this. Yoo Young-joon’s comments weren’t just about JPYC specifically — they were about the market’s efficiency and stability more broadly. Whether that awareness turns into actual policy is unclear. The Virtual Asset User Protection Act would likely need amendments, and that takes time, political will, and probably more incidents like this one to build momentum.
South Korea’s crypto market moves fast. Upbit alone handles volumes that rival major global exchanges on big trading days. A market that size running without formal market-making infrastructure is, in the eyes of critics, an accident waiting to happen. JPYC was the latest example. It probably won’t be the last.
The FSC hasn’t set a timeline for any decision on market makers. The Digital Asset Basic Act is still in development with critical components under negotiation. And JPYC, for its part, is still listed on Upbit — now presumably with a lot more eyes on its order book.
Frequently Asked Questions
What caused JPYC to spike to 37.6 won on Upbit?
JPYC surged from 12 won to 37.6 won within an hour of its September 17 listing on Upbit, with the FSC attributing the move to limited liquidity rather than any fundamental change in the token’s value.
What is South Korea’s Digital Asset Basic Act?
The Digital Asset Basic Act is a proposed regulatory framework from the FSC designed to cover stablecoins, digital asset businesses, and exchanges, though key details — including rules for won-denominated stablecoin issuers — remain unresolved.
Why It Matters
The consideration of market makers in South Korea's crypto sector highlights the ongoing challenges of liquidity and price stability in emerging digital asset markets. The extreme volatility observed with JPYC underscores the need for robust mechanisms to ensure that stablecoins maintain their intended pegs, particularly in regions where regulatory frameworks are still evolving. This move could signal a broader regulatory shift aimed at enhancing market integrity and investor confidence in the South Korean cryptocurrency landscape.
