South Korea Eyes Regulated Crypto Market Making After JPYC Price Shock

South Korea's Financial Services Commission (FSC) is considering introducing regulated crypto market making to improve the efficiency and stability of the country's digital asset market.

The move comes after a recent price anomaly in the stablecoins market, specifically with JPYC, a Japanese yen-backed stablecoin listed on Upbit. The coin briefly priced at more than four times its reference yen due to shallow order books, leaving users who lost money in its wake.

According to Yoo Young-joon, director of digital finance policy at the FSC, regulators will narrow down market efficiency and stability systems, including market-making activities. The existing Virtual Asset User Protection Act does not exempt crypto market makers, making it hard for them to operate within rules aimed at unforeseen dealing or manipulation.

A formal carve-out could establish a clear separation between legitimate liquidity provision and manipulation, but the FSC has yet to announce what its regulation would look like. Exchanges may also face tighter public oversight as part of a broader regulatory reform, including increased governability and requirements for exchange's internal control and financial capacity.