South Korea’s Financial Services Commission said it is considering measures to create a market for the digital asset, after a stablecoin tied to the value of the Japanese yen traded four times its peg on a major South Korean crypto exchange earlier this month.
Crypto exchange Upbit started trading JPYC, a yen-backed stablecoin, on September 17, before the market opened at 12 Korean won per JPYC. to reach A high of 37.6 Korean won just one hour later, more than four times its market value. The spike was attributed to limited liquidity in the upbeat.
“We will also review the need to introduce systems such as market-making operations to enhance the efficiency and stability of the digital asset landscape,” U Yong-jun, director of the FSC’s digital finance policy, said at a conference in Seoul on Monday. Report. “There was also criticism that the price hike after the JPYC listing caused user losses, so calls for discipline in this area are expanding.”
South Korea’s Virtual Asset User Protection Act currently does not exempt market makers from market manipulation provisions, which prevent market makers from providing liquidity to the crypto market. Yoo’s recent comments suggest the FSC may reconsider the decision.
South Korean academics have Controversial Carve out before the market maker. In a 2024 peer-reviewed paper from the Seoul Law Review, KB Securities researcher Lee Min-jung said that regulators did not allow the creation of a crypto market at the time because it could amount to market manipulation. While Lee argued that introducing market makers would be premature due to manipulation concerns, he said regulators could consider a carve-out once the market becomes more stable.
Researchers had been calling for a formal market-making framework long before the recent JPYC episode. A paper by Eunyoung Choi from the Corbitt Research Center argued That the domestic crypto market has faced “severe liquidity problems” due to the absence of a formal market maker system, leading to price inconsistencies and high volatility. The paper cites the kimchi premium as an example of inefficiency in the South Korean crypto market.
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The potential introduction of a market-making system comes as South Korea works to establish a broader regulatory framework for its crypto industry.
D FSC in July That it plans to introduce a unified digital asset fundamental law covering stablecoins and the wider crypto market, including rules on digital asset trading, exchange, disclosure and internal control.
However, lawmakers have yet to settle several key aspects of the legislation, including the rules governing single-denominated stablecoin issuers.
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