South Korea's FSC Weighs Crypto Market Makers After JPYC Hits 37.6 Won on Upbit

JPYC Loses Its Peg on Upbit

JPYC, a stablecoin pegged to the Japanese yen, traded at more than four times its intended value on South Korea's largest crypto exchange earlier this month, and the episode has now pushed the country's top financial regulator toward one of the most consequential market-structure decisions in its crypto sector. Upbit opened trading of JPYC against the Korean won on Sept. 17, with the market starting at 12 won per token. Within roughly an hour, the price touched 37.6 won — more than four times the level the peg implies. The official Upbit market page for the JPYC/KRW pair records the listing and the violent opening print, which traders attributed to an extremely thin order book: with no professional liquidity providers quoting two-sided prices, early buyers faced almost no natural sell pressure. Yoo Young-joon, director of digital finance policy at South Korea's Financial Services Commission (FSC), said Monday at a conference in Seoul that the regulator will review the need to introduce systems such as market-making activities to raise the efficiency and stability of the digital asset market, according to Digital Asset. He also acknowledged criticism that users suffered losses from the price surge following the JPYC listing, noting that demands for discipline in this area are expanding. The comment marks a notable shift in tone. South Korea's Virtual Asset User Protection Act currently contains no exemption for market-making from its market manipulation provisions, which has effectively kept professional liquidity providers out of domestic crypto markets. On a venue of Upbit's size, where retail flow dominates and new listings frequently open with little float, that absence has repeatedly produced prices drifting far from global levels. The JPYC debut was the clearest recent demonstration: a token engineered to track one yen behaved, in its first hour of Korean trading, like a thinly floated airdrop distribution rather than a stablecoin.

A Regulatory Gap Years in the Making

The FSC's reconsideration did not come out of nowhere. Korean researchers argued for a formal market-making framework long before JPYC's wild debut. A 2024 peer-reviewed paper in Seoul Law Review by KB Securities researcher Lee Min Jung documented why the carve-out was withheld: regulators feared that allowing market makers could itself amount to market manipulation, because the Virtual Asset User Protection Act's anti-manipulation provisions make no accommodation for legitimate liquidity provision. Lee judged a carve-out premature at the time, while leaving the door open for regulators to revisit it once the market becomes more stable. An earlier paper by Yoonyoung Choi of the Korbit Research Center went further, arguing that the domestic crypto market suffers from persistent liquidity problems precisely because no formal market-maker system exists — a structural gap that produces chronic price discrepancies, elevated volatility and the long-running Kimchi premium, the recurring gap between Korean and global crypto prices. The problem is not uniquely Korean. On mature global venues, tokens such as Optimism (OP) trade against books maintained by professional liquidity providers, which is what keeps listings orderly. Newer designs — from DAO-governed liquidity experiments such as DeXe (DEXE) to thinly floated launches like World Liberty Financial (WLFI) — teach the same lesson from the other direction: when float and market structure are misaligned, opening prices detach from fundamentals. Seoul's policymakers now appear to accept that a stablecoin's peg is defended at the venue level as much as at the issuer level. The review also runs in parallel with broader legislation: in July, the FSC said it plans a consolidated Digital Asset Basic Act covering stablecoins and the wider market, including rules for digital asset businesses, exchanges, disclosures and internal controls. Lawmakers have yet to settle key details, notably the rules governing won-denominated stablecoin issuers. Readers tracking the market in real time can follow live spot and futures prices on MEXC.

A Test Case for the Digital Asset Basic Act

Our reading at COINOTAG: the JPYC episode is less a stablecoin failure than an exchange microstructure failure. The token's reserves were never the issue; the venue simply lacked participants willing to sell at fair value. That reframes the policy question — peg stability is jointly produced by issuers and market structure, and a jurisdiction that bars liquidity provision will keep generating kimchi-premium-style distortions no matter how strict its issuer rules are. If the FSC folds a market-making exemption into the Digital Asset Basic Act, it would mark the biggest change to Korean crypto market structure since exchange licensing began. For now, though, Seoul has only opened a review; no carve-out has been decided, and timing depends on the Basic Act's legislative progress.