South Korea is considering regulations for cryptocurrency market makers after the Japanese yen stablecoin trades at four times its peg.

South Korea's Financial Services Commission Weighs Market Maker System After JPYC Hit 37.6 Won on Upbit

South Korea's Financial Services Commission said on Monday it is considering a market-making system for digital assets after JPYC, a stablecoin linked to the value of the Japanese yen, traded for as much as four times its peg on Upbit earlier this month. The exchange opened JPYC trading on Sept. 17 at 12 Korean won per JPYC before reaching a high of 37.6 Korean won just one hour later, a move described as more than four times its market value and attributed to limited liquidity on Upbit.

The policy signal came from Yoo Young-joon, director of digital finance policy at the commission, speaking at a conference in Seoul. Digital Asset reported the remarks. Yoo said the commission would review whether systems such as market-making activities should be introduced to increase the efficiency and stability of the digital asset landscape. He also referred to criticism that user losses occurred after the price surge following the JPYC listing, saying demands for discipline in that area are expanding.

A pegged asset and a thin order book

Stablecoins are designed to remain close to a reference value. JPYC is tied to the yen, so its market price is expected to reflect that peg. The Sept. 17 listing shows what can happen when an asset is newly available and there are not enough buyers and sellers to keep the price anchored. The opening price of 12 Korean won per JPYC moved to 37.6 Korean won within one hour, a gap that regulators and market participants linked to limited liquidity rather than a change in the yen.

For users, this matters because a stablecoin that behaves like a volatile asset can create immediate losses for people who assume the price is stable. It also creates uncertainty for exchanges, which must list assets that may trade far from their intended value if order books are thin. A market-making system is meant to reduce that risk by adding continuous quotes and deeper liquidity.

Why South Korea's current law blocks market makers

South Korea's Virtual Asset User Protection Act does not contain an exemption for market-making from its market manipulation provisions. That legal gap prevents market makers from providing liquidity in crypto markets, because the same activity that stabilizes prices can be viewed as manipulation if not clearly permitted. Yoo's latest comments suggest the commission may be reconsidering that position. A possible carve-out would aim to let market makers operate under defined rules while regulators retain tools to police abusive trading.

The debate is not simply about whether liquidity should exist. It is about how to introduce liquidity without weakening market integrity. Market makers can tighten spreads and make order books more resilient, but they also need controls to ensure their activity is transparent and not used to distort prices.

Academic warnings came before the JPYC spike

South Korean academics have discussed a market-maker carve-out before the recent listing. In a 2024 peer-reviewed paper published in Seoul Law Review, KB Securities researcher Lee Min Jung said regulators at the time did not allow crypto market making because it could amount to market manipulation. Lee argued that introducing market makers would be premature while manipulation concerns remained, but she also said regulators could consider a carve-out once the market became more stable.

A separate paper by Yoonyoung Choi from the Korbit Research Center argued that South Korea's domestic crypto market had already been experiencing "serious liquidity problems" because of the absence of a formal market-maker system. Choi said those problems led to price discrepancies and high volatility. The paper cited the Kimchi premium as an example of inefficiency in the country's crypto market. The JPYC episode reinforces those concerns, but it also gives regulators a concrete case to examine.

The wider Digital Asset Basic Act still has gaps

The market-making question sits inside a broader regulatory effort. In July, the commission said it planned to introduce a consolidated Digital Asset Basic Act covering stablecoins and the broader crypto market. The planned framework would include rules for digital asset businesses, exchanges, disclosures and internal controls.

Lawmakers have yet to settle several key aspects of the legislation, including rules governing won-denominated stablecoin issuers. That unresolved area is relevant because stablecoins are central to the current discussion. JPYC is yen-backed, but the same listing and liquidity mechanics could apply to other stablecoin structures if the market develops. The related policy backdrop also includes a move reported in connection with South Korea dropping the Travel Rule threshold for crypto transfers, another sign that regulators are adjusting the rules around digital asset activity.

For readers, the next development to watch is whether the commission turns its review into a formal framework and how that framework would interact with the Digital Asset Basic Act. The core issue is whether South Korea can add enough liquidity to prevent sharp pricing distortions without opening new avenues for manipulation. The answer could shape how exchanges list new assets, how market makers operate, and how stablecoin prices behave on domestic platforms.