South Korea’s Financial Services Commission will review lifting its ban on crypto market-making, a policy shift triggered by a yen-backed stablecoin that traded more than four times above its peg on Upbit earlier this month. The announcement came September 28 at The Bridge Summit 2026 in Seoul.
Yoo Young-jun, the FSC’s director of digital finance policy, told the summit the regulator will review the necessity of introducing systems such as market-making activities to improve the efficiency and stability of digital asset markets. It is the clearest signal yet that Seoul is ready to unwind a rule that has sat largely unchallenged since the Virtual Asset User Protection Act took effect in July 2024.
The trigger is easy to point to. On September 17, Upbit listed JPYC, a yen-pegged stablecoin that raised $38 million in a Series B extension. The token is designed to trade at one JPYC per yen, roughly 8.8 Korean won. Within an hour of listing it hit 37.6 won, more than four times where it should have traded. Upbit’s order book was too thin to absorb the flow, and with no market maker allowed to step in and arb the price back to the peg, the market simply broke. Retail traders who bought at the top took the loss.
What a market maker ban actually did
Korea banned proprietary market-making in crypto under the consumer protection law that followed the 2024 market turmoil. The idea was to keep exchanges from trading against their own customers. The side effect was structural: Korean crypto markets run on retail order flow alone, spreads stay wide, and any asset with thin supply has nothing to pull its price back to fair value. JPYC’s debut showed what that means in practice. A stablecoin that never moved more than a fraction of a percent in Japan traded in a four-to-one range on its first day in Seoul.
Legalizing market makers would not happen overnight. Any carve-out would arrive through the second phase of the Digital Asset Basic Act, the draft legislation that also covers exchange licensing, stablecoin issuance and disclosure standards. Yoo said the FSC is pushing exchanges toward statutory oversight on order matching, coin listing and abnormal-trade monitoring, moving from self-regulation to public rules. Eligibility criteria for licensed market makers, capital requirements and surveillance standards modelled on Korea Exchange rules are all still open questions.
The distinction between the old ban and a licensed regime matters. Under VAUPA, any proprietary trading of customer-facing markets by an exchange affiliate sat in a gray zone, and the safe answer was not to do it. A licensed framework would flip that: firms would apply, post capital, pass suitability checks and accept surveillance obligations, in exchange for a legal right to quote both sides of the book. That is how Korea Exchange operates in traditional equities, and Yoo’s comments point in that direction for crypto. It would also give the regulator a named counterparty to hold responsible when pricing breaks, which the current regime cannot offer.
The stablecoin fight behind it
The review lands in the middle of a bigger standoff. Korea’s plan for a won-denominated stablecoin, the second phase of the same legislative package, is stuck because the FSC and the Bank of Korea cannot agree on who gets to issue one. The central bank wants a bank consortium holding at least 51% of any issuer. The FSC wants room for fintech companies. Lawmakers have targeted a broader digital asset package for 2026, but the issuer question remains the sticking point.
The JPYC incident gives both sides an argument. Regulators skeptical of non-bank issuers can point to a stablecoin breaking its peg on day one. Supporters of a wider market can point to the real cause, which was liquidity, not the token itself. A functioning market maker would have closed the gap within minutes. The FSC has effectively admitted the current rules cost users money, which is what pushed the review onto the agenda.
For exchanges the change could be significant. Upbit dominates Korean volume, and licensed market makers would tighten spreads across the board, improve price discovery and make the market more usable for institutions. Global firms that already make markets in crypto elsewhere have been shut out of Korea’s retail market, one of the largest in the world by trading activity. A licensed regime would give them a legal path in, with capital and conduct rules attached. Korean investors have historically paid some of the widest premia in global crypto, the kimchi premium among them, and thin books are part of the reason.
There is a sequencing question too. Market makers need assets worth making markets in. A won-backed stablecoin regime, if it ever clears the Bank of Korea dispute, would give licensed firms a core product to quote around the clock. Reviewing the ban before the stablecoin law is settled suggests the FSC is preparing the plumbing in advance, in case the political logjam breaks.
Nothing is approved yet. Yoo’s comments were a review announcement, not a rule change, and the FSC set no timeline. Whether it moves fast probably depends on whether the stablecoin issuer fight breaks before the legislative session ends. If the Phase 2 package moves, market making would arrive alongside it as part of the same rewrite. If the package stalls again, JPYC-style spikes keep happening, and each one becomes another exhibit in the argument for letting professionals hold two-sided books.