Yen-backed stablecoin JPYC traded as high as 37.6 South Korean won on Upbit within an hour of its Sept. 17 listing, more than four times its intended peg. The price spike has pushed South Korea's Financial Services Commission to weigh a formal crypto market-making regime, Director of Digital Finance Policy Yoo Young-joon said at a Seoul conference this week.

JPYC opened at 12 won per token on the exchange before climbing to 37.6 won, a level the FSC attributed to limited liquidity on the newly listed pair. Yoo framed the episode as a consumer-protection failure: "There were also criticisms that user losses occurred from the price surge after the JPYC listing, so demands for discipline in this area are expanding," he told the conference, according to Digital Asset.

What does South Korean law currently say?

The country's Virtual Asset User Protection Act, in force since 2024, contains no exemption from its market-manipulation provisions for professional liquidity providers. The omission has effectively pushed market makers out of compliant venues and left retail order books thin, especially on new listings.

KB Securities researcher Lee Min Jung reached the same conclusion in a 2024 Seoul Law Review paper, calling market-making permission "premature" given manipulation risks but leaving the door open to a future carve-out. Yoo's remarks suggest that conditional review is now underway at the FSC.

Why is this surfacing now?

Research has flagged the depth problem for years. Yoonyoung Choi of the Korbit Research Center argued that domestic venues face "serious liquidity problems" without a sanctioned market-making system, pointing to persistent price gaps between Korean and offshore exchanges — the so-called kimchi premium — as evidence.

The JPYC episode supplies a fresh data point. The token, issued by Tokyo-based JPYC Inc., was designed to track the Japanese yen at prevailing FX rates. The fourfold spike inside an hour shows how quickly a thin book moves when no designated liquidity provider is present.

What changes if a market-making regime is introduced?

A formal framework would let licensed entities post two-way quotes on registered venues without tripping the Act's manipulation clauses. That would deepen individual-token books, including newly listed stablecoins, and could narrow cross-venue premiums on major pairs.

It would also create a new supervisory perimeter. The FSC would need to license market makers, set capital and surveillance standards, and decide whether the regime applies to won-denominated stablecoins — an area where South Korean lawmakers remain divided.

What is the broader legislative timeline?

The market-making review sits inside a wider rewrite of Korean digital-asset law. The FSC said in July it plans a consolidated Digital Asset Basic Act covering stablecoins, exchanges, disclosures and internal controls. Key questions — including the treatment of won-pegged issuers — remain unresolved in the National Assembly.

The agency's signal this week narrows one of those questions: how, under what safeguards, professional liquidity provision should fit into the new regime. With the consolidated bill still in draft, the FSC's next concrete step is a public consultation or sandbox framework ahead of legislative debate.