South Korea's Financial Services Commission (FSC) announced on September 28 at The Bridge Summit 2026 in Gangnam, Seoul, that it will review legalizing crypto market makers, a practice currently banned under the Virtual Asset User Protection Act (VAUPA).
FSC Director of Digital Finance Policy Yoo Young-jun stated the regulator will "review the necessity of introducing systems such as market-making activities to enhance efficiency and stability of digital asset markets."
Market Structure Failure Triggers Review
The policy review was directly triggered by a market-structure failure on September 17. Upbit listed JPYC, a yen-backed stablecoin designed to trade at 1 JPYC = ¥1 (approximately 8.8 KRW). Within one hour of listing, the token reached 37.6 KRW, more than four times its intended peg.
The spike was not caused by insolvency—JPYC continued to redeem at ¥1 at its issuer. Instead, the problem stemmed from structurally thin Korean won order books with no professional two-sided liquidity flow. Local analysts characterized the incident as a "serious liquidity problem" on the Korean side.
Yoo acknowledged "user losses" from the episode and noted that "demands for discipline in this area are expanding."
Broader Regulatory Context
South Korea recently lifted its nine-year ban on corporate crypto investment, opening the door for over 3,500 firms to hold digital assets. However, without legal two-sided order books, large corporate entries risk encountering the same thin liquidity problems that affected retail traders.
South Korea's thin-book problem reflects a persistent gap between local and global crypto prices, known as the Kimchi premium. VAUPA's current blanket ban treats two-sided quoting as a form of market manipulation, whereas similar market-making infrastructure is legal in Korean equities.
Phase-2 Legislation and Timeline
The market-maker carve-out would arrive through Korea's Digital Asset Basic Act, a draft finalized earlier this year. That Phase-2 legislation also covers exchange licensing, stablecoin issuance, and disclosure standards.
Yoo added that the FSC is pushing exchanges toward statutory oversight on matching, listing, and abnormal-trade monitoring, moving from self-regulation to public rules.
The FSC's three-stage tokenization roadmap targets February 2027. The regulator has acknowledged that the current market-maker ban is costing users. Eligibility criteria for licensed crypto market makers, won stablecoin issuer rules, and the full Phase-2 timeline remain open questions.
