- South Korea‘s FSC is reviewing whether to introduce market-making for digital assets after JPYC surged to about four times its peg on Upbit.
- Current South Korean law considers market-making potentially market manipulation, with no exemption for digital asset liquidity providers.
- Academics have debated a market-maker carve-out, citing liquidity problems and the Kimchi premium as evidence of market inefficiency.
- The FSC is also developing a broader Digital Asset Basic Act covering stablecoins and exchange rules.
At a Seoul conference on Monday, South Korea‘s Financial Services Commission said it is reviewing whether to introduce a market-making system for digital assets. That review follows a Sept. 17 incident in which JPYC, a yen-backed stablecoin, opened at 12 Korean won (about $0.009) on Upbit and reached a high of 37.6 won (about $0.029) within an hour, more than four times its peg, according to exchange data.
“We will also review the need to introduce systems such as market-making activities to increase the efficiency and stability of the digital asset landscape,” Yoo Young-joon, director of digital finance policy at the FSC, said at the conference, as Digital Asset reported. He added that user losses from the price surge had expanded demands for discipline in the area.
However, South Korea’s Virtual Asset User Protection Act currently offers no market-making exemption from market manipulation provisions, effectively blocking market makers from providing liquidity. The FSC’s latest comments suggest regulators may be reconsidering that position.
South Korean researchers have debated such a carve-out before. In a 2024 Seoul Law Review paper, KB Securities researcher Lee Min Jung said legalizing market-making could be premature due to manipulation concerns, though she said regulators could revisit the issue once the market stabilizes, according to the paper. Similarly, Korbit Research Center’s Yoon Young Choi argued the domestic crypto market faces “serious liquidity problems” without a formal market-making framework, citing the Kimchi premium as an example of inefficiency, wrote in another paper.
Meanwhile, the potential market-making system comes as South Korea builds a broader crypto regulatory framework. The FSC said in July it plans to introduce a consolidated Digital Asset Basic Act covering stablecoins, exchanges, disclosures and internal controls, though lawmakers have yet to settle rules for won-denominated stablecoin issuers.
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