South Korea May Allow Crypto Market Makers After JPYC Stablecoin Spike on Upbit

South Korea's Financial Services Commission is weighing a formal market-making framework for digital assets after a yen-backed stablecoin briefly traded at more than four times its intended peg on Upbit, the country's largest crypto exchange. JPYC launched on Upbit on Sept. 17 at 12 Korean won per token and surged to a high of 37.6 won within an hour — a spike regulators attributed to critically thin liquidity rather than organic demand.

Speaking at a conference in Seoul on Monday, Yoo Young-joon, director of digital finance policy at the FSC, said the agency will "review the need to introduce systems such as market-making activities to increase the efficiency and stability of the digital asset landscape." Yoo acknowledged that users suffered losses during the JPYC price surge, adding that "demands for discipline in this area are expanding." Under South Korea's Virtual Asset User Protection Act, no exemption currently exists for market-making activity within the statute's market manipulation provisions, effectively barring professional liquidity providers from operating in the domestic crypto market.

The JPYC episode echoes longstanding concerns from Korean researchers about structural liquidity gaps. In a 2024 peer-reviewed paper for the Seoul Law Review, KB Securities researcher Lee Min Jung cautioned that introducing crypto market makers would be premature given manipulation risks but argued a carve-out could become viable as the market matures. Separately, Yoonyoung Choi of the Korbit Research Center has pointed to the persistent Kimchi premium — the gap between Korean and overseas crypto prices — as evidence that the absence of a formal market-making system is causing price discrepancies and elevated volatility.

The potential policy shift comes as South Korea pushes to build a comprehensive regulatory framework for its crypto sector. In July, the FSC announced plans to introduce a consolidated Digital Asset Act, and the agency separately dropped the Travel Rule threshold for crypto transfers. Whether the FSC moves to formally license market makers or simply issue guidance under existing rules will signal how seriously Seoul intends to professionalize liquidity provision in one of Asia's most active crypto markets.