South Korea's Financial Services Commission (FSC) is reevaluating its stance on crypto market makers after the yen-backed stablecoin JPYC experienced a dramatic price surge on the Upbit exchange. This spike saw JPYC trading at 37.6 Korean won, more than four times its peg, highlighting potential liquidity issues.
The FSC's director of digital finance policy, Yoo Young-joon, indicated at a recent conference that the introduction of market-making activities could enhance the efficiency and stability of the digital asset landscape. This comes in response to user losses attributed to the price volatility following JPYC's listing.
Currently, South Korea's Virtual Asset User Protection Act does not allow exemptions for market-making activities, which limits liquidity in the crypto market. However, Yoo's comments suggest that regulators may be open to revising this approach to better protect users and stabilize the market.
Academics have previously debated the potential for a market-maker carve-out, with some arguing that it could help address liquidity issues and price discrepancies within the domestic crypto market. The FSC is also working on a comprehensive regulatory framework for digital assets, which includes rules for stablecoins and exchanges.
As South Korea navigates these regulatory changes, the potential introduction of a market-making system could mark a significant shift in the country's approach to cryptocurrency trading and market stability.