South Korea’s Financial Services Commission is examining whether to permit regulated market-making activity in digital asset markets, a practice currently restricted under the Virtual Asset User Protection Act. The review follows sharp price dislocations in several stablecoins listed on local exchanges earlier this month.

JPYC Listing Triggers Extreme Price Move

On September 17, Upbit began trading JPYC, a stablecoin designed to track the Japanese yen at a value of one yen per token, or roughly 8.8 South Korean won. Trading opened near 12 won. Within about an hour the price climbed to 37.6 won, more than four times the intended reference level.

The surge was attributed to limited liquidity on the Korean won order book rather than any issue with the issuer’s reserves. Additional deposit networks were later activated, supply increased, and the price returned toward the 8-won range the following day. Issuance was briefly paused during the episode.

Data provided by Upbit to a lawmaker showed that 21,219 investors purchased JPYC at prices more than 10 percent above the yen-won reference rate over the subsequent five days. Those purchases totaled approximately 259.9 billion won, or about $192 million.

Yoo made the remarks on September 28 at a conference in Seoul. The comments mark a potential shift from the existing interpretation of market manipulation rules, which currently leave no clear exemption for professional two-sided liquidity provision in crypto markets.

Broader Pattern of Stablecoin Volatility

JPYC was not an isolated case. On the same day, PayPal’s PYUSD reached an all-time high of 1,760 won on Upbit before retreating. On Bithumb, Circle’s euro-backed EURC jumped more than 400 percent to 7,860 won on September 14, with a large share of volume concentrated in a short window. USDG also rose sharply on the same exchange.

In each instance the underlying currency peg remained intact. The price moves stemmed from sudden demand meeting shallow order books. Industry participants have called for requirements on initial circulating supply, responsive issuance and redemption channels, and mechanisms to limit trading when prices diverge significantly from reference values.

Regulatory Context and Next Steps

Market making remains restricted under current law. Any formal framework would require further regulatory and legislative work. The discussion is taking place as South Korea advances its Digital Asset Basic Act, intended to cover exchange licensing, stablecoin issuance, disclosure standards and internal controls.

An FSC official indicated the legislation is expected to reach a National Assembly bill review subcommittee in November. Several core issues remain unresolved, including the structure for won-denominated stablecoin issuers. The Bank of Korea has favored a bank-led model citing monetary policy and stability considerations.

Researchers had previously identified liquidity shortfalls in the domestic market, pointing to persistent local price premiums relative to global markets and elevated volatility during new listings. The recent episodes have added urgency to those long-standing concerns.

No formal exemption or licensing regime has been approved. The FSC’s statements constitute a policy signal that exchange-level liquidity is now viewed as a distinct regulatory priority alongside issuer reserves and market integrity rules.