South Korea Considers Allowing Regulated Crypto Market-Making

South Korean financial authorities are considering relaxing restrictions on market-making in the country's cryptocurrency market to improve liquidity and stability. This move would allow regulated professionals to provide continuous buy and sell orders, subject to disclosure, monitoring, and conflict-of-interest requirements. The proposal aims to reduce extreme price volatility and thin order books on domestic exchanges.

Historically, South Korea has taken a restrictive approach toward formal crypto market-making arrangements due to concerns that exchange-affiliated or issuer-funded trading could distort prices and create artificial volume. However, regulators now recognize that prohibiting professional liquidity provision can contribute to these issues.

The proposed framework would distinguish legitimate market-making from manipulative activities such as wash trading, spoofing, and coordinated price manipulation, which would remain prohibited. Regulators are examining whether tightly supervised liquidity provision could make South Korea's crypto markets deeper, less volatile, and more resilient.