South Korea is looking to reconsider restrictions imposed on market makers in the digital asset market, after the Japanese yen-linked stablecoin JPYC saw a sharp jump on the Upbit platform, reaching more than four times its peg within a short period after its listing.
The Korea Financial Services Commission said it is considering introducing a market maker system for digital assets, a step that reflects a broader review of how to strike a balance between preventing market manipulation and providing the liquidity needed for orderly trading.
Upbit had opened trading for JPYC on September 17, with the price starting at 12 won per JPYC, before rising to 37.6 won in just one hour. According to reports, this jump was linked to low liquidity on the platform at the time of listing.
Speaking at a conference in Seoul on Monday, Yoo Young-jun, director of digital finance policy at the agency, said the regulator would also review the need to introduce systems such as market-maker activities to improve the efficiency and stability of the digital asset environment. He added that there are criticisms that users suffered losses after the price surge that followed the listing of JPYC, meaning calls for greater discipline in this area are expanding.
At present, South Korea’s virtual asset user protection law does not include a special exception for market makers from market manipulation provisions. In practice, this makes it difficult for market makers to provide liquidity in cryptocurrency markets, because any activity of this kind may be viewed within the framework of prohibited manipulation.
This review points to the possibility of a significant change in the regulatory approach. Rather than seeing market makers as a regulatory risk in themselves, authorities may start considering them as a tool to improve pricing efficiency and reduce volatility, provided there are clear compliance controls.
The debate over this exception is not new. Prior academic research in South Korea has addressed the idea of allowing market makers, with reservations still in place due to concerns about manipulation. In a research paper published in 2024, Lee Min-jung of KB Securities said regulators did not allow market making in cryptocurrencies at the time because it could be considered a form of manipulation, although she believed introducing this exception could become possible later as the market matures and becomes more stable.
Other research, by contrast, urged putting an official framework for market makers in place earlier, arguing that the absence of such a framework worsens liquidity problems and leads to large price spreads and sharp volatility. The studies also noted that the kimchi premium is an example of pricing inefficiency in the Korean market.
These developments come as South Korea works to build a broader regulatory framework for the digital asset sector. In July, the agency said it planned to introduce a unified foundational law for digital assets covering stablecoins and the wider market, along with rules for digital asset firms, platforms, disclosures, and internal controls.
However, some key details remain unresolved, including the rules governing won-denominated stablecoin issuers. This means any move to allow market makers could become part of a wider reshaping of compliance and liquidity structure in the Korean market.