South Korea weighs crypto market makers after JPYC trades at 4 times peg

What happened

South Korea's Financial Services Commission is considering a market-making system for digital assets, the regulator said. Yoo Young-joon, director of digital finance policy at the FSC, said the regulator would review the need to introduce systems such as market-making activities to increase the efficiency and stability of the digital asset landscape. He spoke at a conference in Seoul, and CoinGape reported the announcement came on September 28 at The Bridge Summit 2026 in Gangnam, Seoul.

Crypto exchange Upbit opened trading of JPYC, a yen-backed stablecoin, on Sept. 17. The market opened at 12 Korean won per JPYC and reached a high of 37.6 Korean won just an hour later, more than four times its market value. Cointelegraph said the spike was attributed to limited liquidity on Upbit, and CoinGape reported the token hit 37.6 KRW within one hour of its listing, local analysts described a serious liquidity problem on the Korean side.

Yoo said there were criticisms that user losses occurred from the price surge after the JPYC listing, and that demands for discipline in this area are expanding. JPYC is designed to trade at 1 JPYC = ¥1, or about 8.8 KRW, and it still redeems at ¥1 at the issuer, so the spike was not a case of insolvency. CoinGape reported that issuance was briefly paused, supply ramped and the premium collapsed, but not before retail traders absorbed the loss.

Why it matters

The policy question matters because market making is effectively restricted in South Korea. The Virtual Asset User Protection Act does not contain an exemption for market-making from its market manipulation provisions, which prevents market makers from providing liquidity in crypto markets. CoinGape reported that the law's blanket ban treats two-sided quoting as a form of market manipulation, even though two-sided quoting is standard infrastructure in Korean equities.

Any carve-out would arrive through the Digital Asset Basic Act, a draft finalised earlier this year that also covers exchange licensing, stablecoin issuance and disclosure standards. The FSC said in July that it planned a consolidated act covering stablecoins and the broader crypto market, including rules for digital asset businesses, exchanges, disclosures and internal controls.

The timing follows other changes. South Korea recently lifted its nine-year ban on corporate crypto investment, opening the door for over 3,500 firms to hold digital assets. CoinGape reported that without legal two-sided order books, large corporate entries risk the same thin liquidity that hit retail traders in the JPYC episode.

What the data shows

JPYC opened at 12 Korean won per token on Upbit and reached 37.6 Korean won within about an hour, more than four times its peg. The token is designed to trade at 1 JPYC = ¥1, approximately 8.8 KRW, and had raised $38 million in a Series B extension before the listing.

First-day won volumes on Upbit ran into the hundreds of billions of KRW, according to CoinGape.

Background

Researchers had called for a formal market-making framework well before the JPYC listing. A paper by Yoonyoung Choi of the Korbit Research Center argued that the domestic crypto market has been experiencing serious liquidity problems due to the absence of a formal market maker system, leading to price discrepancies and high volatility. In a 2024 peer-reviewed paper from Seoul Law Review, KB Securities researcher Lee Min Jung said regulators at the time did not allow crypto market making as it could amount to market manipulation.

CoinGape described the Kimchi premium, the persistent gap between local and global crypto prices, as long reflecting the absence of legal arbitrage and professional liquidity flows.

What is still unclear

• It is not clear whether the FSC will propose a market-making carve-out or when. Lawmakers have yet to settle several key aspects of the Digital Asset Basic Act, including rules governing won-denominated stablecoin issuers.
• The FSC and the Bank of Korea also disagree on who may issue a won-backed token, a split CoinGape said has stalled Korea's stablecoin rules.

Questions readers ask

Sources

1. 1 CointelegraphSouth Korea weighs crypto market makers after JPYC trades at 4 times peg · 28 Sep, 05:42 UTC
2. 2 CoinGapeSouth Korea’s FSC Eyes End to Crypto Market-Maker Ban After JPYC Blows Past Peg on Upbit · 28 Sep, 08:41 UTC
3. 3 Cryptonews.comSouth Korea Weighs Crypto Market Makers After JPYC Price Surge · 28 Sep, 10:03 UTC