South Korea’s Financial Services Commission is considering whether to introduce a market-making framework for digital assets after sharp price moves in a newly listed yen-backed stablecoin drew criticism over investor losses and market stability.

The discussion follows trading in JPYC on Upbit on Sept. 17, when the token opened at 12 Korean won and climbed to 37.6 won within about an hour. According to the report, the move took the token to more than four times its market value and was attributed to limited liquidity on the exchange.

JPYC listing prompted regulatory attention

The episode centered on JPYC, a stablecoin backed by the Japanese yen, after Upbit began trading in the asset on Sept. 17. Shortly after the market opened, the token rose far above its intended reference value in won terms.

The reported jump from 12 won to 37.6 won became a focal point for regulators because it highlighted how thin order books can produce sharp dislocations, even in an asset designed to track a fiat currency. The incident also sparked criticism that users suffered losses during the surge.

FSC says market-making is under review

At a conference in Seoul, Yoo Young-joon, director of digital finance policy at the FSC, said the regulator will review whether systems such as market-making activities are needed to improve the efficiency and stability of the digital asset market.

Yoo said calls for tighter discipline have grown following the JPYC listing. His remarks indicate the commission is weighing whether formal liquidity-support mechanisms could reduce extreme price swings in similar situations, though no final policy decision was announced.

Current law limits market makers

One obstacle is South Korea’s Virtual Asset User Protection Act. The law does not provide a specific exemption for market-making under its market-manipulation rules, which effectively prevents market makers from operating in local crypto markets.

That legal structure has left exchanges without a recognized route for designated liquidity providers in digital assets. The FSC’s latest comments suggest the regulator is reassessing whether that approach should be changed.

What comes next

For now, the confirmed step is a regulatory review rather than a rule change. The FSC has signaled it will examine whether market-making should be allowed as part of a broader effort to make digital-asset trading more stable and efficient.

Any shift would likely require addressing how market makers can provide liquidity without conflicting with existing manipulation prohibitions. Until then, the JPYC move on Upbit remains a recent example of how limited liquidity can amplify price distortions in South Korea’s crypto market.

Source: cointelegraph.com