South Korea Considers Allowing Crypto Market-Making Amid Price Distortion Fears

The Financial Services Commission of South Korea is reviewing whether to allow market-making in digital assets after a sharp price distortion occurred on a local exchange. The review comes as policymakers work on a broader crypto rulebook that will also cover stablecoins, exchanges, disclosures, and internal controls.

According to Yoo Young-joon, director of the Financial Services Commission's digital finance policy department, the regulator will examine whether market-making activities should be introduced to improve the efficiency and stability of the digital asset market. This move comes after trading in JPYC on Upbit earlier this month, where the yen-backed stablecoin surged from 12 won to as high as 37.6 won within one hour, more than four times its market value.

The spike is attributed to limited liquidity on the exchange, and Yoo notes that criticism has grown after users incurred losses during the post-listing surge. Currently, South Korea's Virtual Asset User Protection Act does not provide an exemption for market-making from market manipulation rules, effectively preventing market makers from supplying liquidity in crypto trading.