South Korea Reviews Lifting Crypto Market-Making Ban After Stablecoin Spike
A yen-pegged stablecoin's 4x price surge exposed the dangers of thin liquidity, pushing regulators to reconsider a prohibition that was meant to prevent manipulation.
South Korea's Financial Services Commission announced on September 28 that it will review lifting its ban on crypto market-making, a shift triggered by a dramatic market failure. On September 17, Upbit listed JPYC, a stablecoin pegged to the Japanese yen, which spiked from roughly 12 won to 37.6 won within an hour—more than four times its 8.8-won reference value. According to data shared with lawmakers, roughly 21,219 retail investors bought JPYC at rates exceeding the yen-won peg by more than 10%, collectively losing an estimated 259.9 billion won. The surge was attributed to thin order-book depth and the absence of professional liquidity providers willing to absorb demand. The market-making ban exists under South Korea's Virtual Asset User Protection Act (VAUPA), which took effect in July 2024 and was designed to prevent price manipulation following years of pump-and-dump scandals. FSC Director Yoo Young-jun stated the commission would "review the necessity of introducing systems such as market-making activities to enhance efficiency and stability of digital asset markets." Any formal change would likely arrive through Phase 2 of the Digital Asset Basic Act, expected to reach a National Assembly review in November. The move follows Seoul's broader regulatory momentum, including the January 2026 lifting of a nine-year ban on corporate crypto investment and ongoing work on stablecoin licensing and ETF rules.
How could this affect you
Traced by who's actually in the path of this — not everyone is.
Likely
Retail crypto traders in South Korea
If market-making is legalized, liquidity on South Korean exchanges could improve, reducing extreme price swings on new token listings. However, market-maker safeguards would need to prevent the very manipulation the ban was designed to stop.
Likely
Global institutional market makers and quant firms
A market-making exemption could open South Korea's 367-billion-dollar-per-half-year won-denominated crypto market to professional liquidity providers currently locked out by VAUPA. Profitability depends on whether the framework includes sufficient regulatory clarity and enforcement.
Likely
South Korean crypto exchanges
Legalized market-making could reduce liability from thin-liquidity incidents like JPYC's peg break, but would require exchanges to implement new surveillance and compliance systems to ensure market makers do not engage in manipulation.
Possible
Stablecoin issuers and payment providers
Market-making could stabilize stablecoin pegs on Korean exchanges, improving utility for cross-border payments and settlement. This would align with Seoul's broader goal of positioning itself as a crypto hub and supporting won-backed stablecoin development.
Sources
Every claim here traces back to reporting you can read yourself.
