Regulators noted that without legitimate market makers
South Korean financial regulators are reviewing restrictions on cryptocurrency market makers following unusual trading activity in the JPYC stablecoin, which briefly traded at four times its intended one-yen peg in late September 2026. The anomaly raised concerns about market manipulation and liquidity gaps, prompting authorities to reassess current rules that effectively prohibit market making in digital assets under existing financial investment services laws. Officials say the incident highlighted the need for clearer frameworks to support price stability while preventing abuse. Regulators Reevaluate Ban on Market Making Activities The Financial Services Commission confirmed it is studying whether licensed entities could be permitted to act as market makers for certain cryptocurrencies under strict oversight, a practice currently barred due to fears it could facilitate price manipulation.
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What is a euro-pegged stablecoin?Regulators noted that without legitimate market makers, thin order books can exacerbate volatility and enable artificial price swings, as seen in the JPYC case where limited liquidity allowed speculative trades to push the token far from its peg. Discussions are focusing on defining eligible assets, setting capital requirements, and implementing real-time monitoring to detect abusive behavior. How Could Oversight Prevent Future Stablecoin Deviations? Proposed safeguards include mandatory reporting of large trades, limits on position sizes for market makers, and mandatory audits of algorithmic trading strategies. Officials emphasized that any permission would come with stringent conditions, including segregation of client assets and regular stress tests. Industry representatives have welcomed the review, arguing that regulated market making could improve market resilience and reduce opportunities for manipulation, provided rules are clear and enforceable.
No timeline has been set for potential policy changes
No timeline has been set for potential policy changes. Frequently Asked Questions What caused JPYC to trade at four times its peg? The stablecoin deviated sharply due to extremely low liquidity and a lack of authorized market participants, allowing small-volume trades to disproportionately impact its price. Would market makers be allowed for all cryptocurrencies? Regulators indicated that any permission would likely apply only to specific, low-risk assets like stablecoins, not volatile tokens, and would require prior approval. What safeguards are being considered to prevent abuse? Proposed measures include trade reporting thresholds, position limits, algorithm audits, and real-time surveillance to detect manipulative patterns.
