Summary

  • South Korea's FSC is reviewing legalization of crypto market making to address thin liquidity after the JPYC surge.
  • The JPYC fourfold price spike on Upbit after its September 17 listing triggered immediate regulatory review.
  • A $36 million exploit has prompted tighter exchange oversight alongside the policy evaluation.

South Korea's Financial Services Commission weighs legalization of crypto market making. The JPYC stablecoin surged fourfold on Upbit right after its September 17 listing. The commission targets thin liquidity in the domestic market and tightens exchange oversight after a $36 million exploit.

Current law treats crypto market making as unfair trading. The FSC now considers legalization to improve conditions for traders and platforms.

Context

South Korea lifted its nine-year ban on corporate crypto investments this year. This change opened the door for more than 3,500 firms to hold digital assets. Thin liquidity has remained a persistent issue despite growing participation.

The JPYC surge and the exploit on Upbit exposed gaps in market structure.

Regulators responded with inspection letters and a formal review of market-making practices. The goal is to balance liquidity improvements with stronger controls on exchanges.

Details

FSC officials examine how to permit market making without creating new risks. Approved sources note that the commission will assess rules that treat market making as a regulated activity rather than an unfair practice.

"FSC is now considering legalization of crypto market making."

, Unchained Crypto (Source)

The review ties directly to the JPYC event and the exploit. Both incidents prompted rapid FSC action in 2026. Legalization could allow designated market makers to provide quotes and depth.

Analysts warn that volatility may rise if oversight lags. South Korea crypto regulation now centers on pairing any new permissions with stricter exchange standards. Upbit oversight is expected to include enhanced monitoring and reporting requirements.

Legalizing market making may improve Korean crypto liquidity when paired with clear rules. The FSC review remains ongoing. Outcomes depend on findings from the current inspections.