Crypto28 September, 20262 min read
South Korea’s FSC Reviews Ending Crypto Market-Maker Ban After JPYC Spikes on Upbit
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FSC weighs ending ban on crypto market makers after JPYC spike JPYC traded up to four times peg on Upbit, exposing liquidity risks
6 outlets told this the same way.
JPYC spike triggers review
South Korea’s Financial Services Commission said it will review legalizing crypto market makers after JPYC traded at up to 37.6 Korean won on Upbit, more than four times its peg, following the stablecoin’s Sept. 17 listing.
FSC director of digital finance policy Yoo Young-jun said the regulator will "review the necessity of introducing systems such as market-making activities to enhance efficiency and stability of digital asset markets."
Upbit opened trading of JPYC at 12 Korean won per JPYC before the token reached a high of 37.6 Korean won within about an hour, and the spike was attributed to limited liquidity on Upbit.
Yoo also pointed to criticisms that user losses occurred from the price surge after the JPYC listing, and he said "demands for discipline in this area are expanding."
Ban under VAUPA
South Korea’s Virtual Asset User Protection Act currently does not provide an exemption for market-making from its market manipulation provisions, which prevents market makers from providing liquidity in crypto markets. Cointelegraph said the FSC’s latest comments suggest the regulator could be reconsidering that decision, after the VAUPA framework left market-making effectively restricted.
A 2024 peer-reviewed paper in the Seoul Law Review argued that regulators did not allow crypto market making because it could amount to market manipulation, and KB Securities researcher Lee Min Jung said regulators saw market-making and manipulation as too close for comfort. The same debate framed a potential carve-out as something regulators could consider once the market becomes more stable, and the JPYC episode became the new test case for whether liquidity rules need to change.
What could change next
The FSC said any market-maker carve-out would be considered alongside South Korea’s broader Digital Asset Basic Act framework, which is intended to cover stablecoins and the broader crypto market. CoinGape said the Phase-2 Digital Asset Basic Act would arrive alongside exchange licensing, stablecoin rules, and disclosure standards, while the FSC also pushed exchanges toward statutory oversight on matching, listing, and abnormal-trade monitoring.
“The review has not produced a decision to allow crypto market makers.”
Tokenpost said the review has not produced a decision to allow crypto market makers, and it said the FSC is reviewing whether South Korea needs a formal crypto market-making system. CoinGape also said the timing matters because Korea’s stablecoin rules have already hit a dead end as the FSC and Bank of Korea disagree on who may issue a won-backed token, leaving the next steps unresolved.