South Korea weighs liquidity rules for won stablecoins
According to News1, South Korean market participants are pressing regulators to add liquidity safeguards to the country’s coming won stablecoin rules after several foreign stablecoins traded at extreme premiums on local exchanges.
- Thin markets matter: reserves alone do not stop wild price swings
- Policy is still open: stablecoin issuer rules are not finalized
- Trading mechanics are now the focus: supply, redemption, and market makers are on the table
The basic problem is simple. A stablecoin can be backed and still trade badly if the market around it is shallow. If there are too few tokens in circulation, too few active quotes, or too little access to mint and redeem, the market price can drift far from the reference value. A stablecoin is only as stable as the market around it.
That issue has become harder for South Korea’s regulators to ignore. The country’s second-stage digital asset legislation is expected to cover stablecoin issuance and circulation, but key details remain unresolved. That includes who gets to issue a won-backed token, how it can trade, and what rules should exist to stop local exchanges from turning a supposedly stable asset into a price-discovery mess.
News1 reported that market participants want regulators to examine initial circulating supply, issuance and redemption channels, market makers, and controls for unusual trading. In plain English, that means they want rules that make sure a stablecoin can move in and out of circulation cleanly, with enough liquidity to absorb demand without violent price spikes.
That concern was not raised in the abstract. Recent trading on South Korean exchanges showed how badly prices can distort when liquidity is thin.
On Sept. 17, Upbit listed JPYC and PayPal USD (PYUSD) against KRW, BTC, and USDT. Yonhap reported JPYC started trading around 12 won, while Upbit cited a reference price of 8.81 won. JPYC later climbed as high as 37.6 won before moving back toward the 8-won range the following day.
UPBIT Launches Trading for PYUSD and JPYC Against KRW, BTC on that date while keeping the PYUSD schedule unchanged. The exact reason for the delay was not spelled out in the notes available, but the episode shows how sensitive stablecoin listings can be when the market structure is not ready for them.
There was also a reporting discrepancy around JPYC’s deposit networks. The notes say Upbit later expanded support beyond Ethereum to include Kaia and Polygon, while another source available for cross-checking said deposits and withdrawals were limited to Ethereum. That detail should be treated cautiously unless verified directly from Upbit’s own listing notice.
PYUSD did not exactly glide into the market either. It reached an all-time high of 1, 760 won on Upbit on Sept. 17 before falling toward the 1, 360-won area. That does not automatically mean the token broke its peg in any fundamental sense. It does show how quickly a local order book can overpower the idea of “stable” when buyers show up and liquidity does not.
The same pattern showed up on Bithumb. EURC reached 7, 860 won shortly after midnight on Sept. 14, compared with a previous closing price of 1, 513 won. That was a rise of more than 400%. Bithumb’s official records show EURC entered the won market on Aug. 28 with a reference price of 1, 609 won, and supported deposits and withdrawals through Ethereum.
About 60% of EURC volume that day was executed within a 15-minute period. That is the sort of market concentration regulators tend to hate, because it suggests price discovery was happening in a very narrow window rather than across a healthy pool of buyers and sellers.
USDG also moved sharply on Bithumb, reaching 3, 048 won from a previous close near 1, 358 won. Again, the point is not that the token necessarily failed as a stablecoin. The point is that a thin market can produce a very unstable trading result even when the underlying asset is supposed to be boring.
Those trading episodes are now feeding into the policy debate. Industry participants are urging South Korean regulators to go beyond reserve requirements and consider the mechanics of trading itself. The ideas being discussed include requiring sufficient initial circulating supply before listing, setting up reliable issuance and redemption routes, using market makers or liquidity providers to keep buy and sell quotes active, showing deviations from the reference value, and restricting certain market orders when prices move too far too fast.
That is the right place to focus. Stablecoin policy is not just about whether the issuer holds enough reserves. It is also about whether the token can function like money once it reaches an exchange. Without market depth, the peg is little more than a slogan.
The Financial Services Commission has not announced final rules for these liquidity safeguards. On Sept. 22, an FSC official said the Digital Asset Framework Act is expected to reach a National Assembly bill review subcommittee in November. There are currently ten digital asset and stablecoin proposals pending.
The broader legislative picture is still shifting. In January, the FSC said discussions with other agencies were continuing and key provisions had not yet been settled. In August, it said work was still underway on a government proposal for the second-stage Digital Asset Act, and that specific provisions, including ownership rules affecting crypto exchanges, had not been finalized. Earlier in the year, the regulator also pushed back on reports that issuer structures had already been decided, calling them “premature.”
The Bank of Korea Doubts Won Stablecoin as Circle Pushes for an initial bank-led structure for won stablecoins. In practical terms, that means banks would play the central role in issuance or control, either directly or through consortium-style arrangements. The central bank’s logic is straightforward. If a token is going to track the won, the people responsible for the won should have a hand on the wheel.
That stance is understandable, but it is also conservative. A bank-led model may lower some risks around payments and monetary stability, yet it could also slow down competition and make the system harder for non-bank innovators to use. South Korea is trying to thread the usual needle here, protect the monetary system without building a regulatory museum piece.
The FSC’s September securities-token roadmap adds another layer. It suggested that future on-chain payment infrastructure could eventually connect tokenized securities with stablecoins, but later stages depend in part on the pending stablecoin legislation. That makes the liquidity debate more than a narrow exchange issue. If South Korea gets the stablecoin framework wrong, it could complicate the plumbing for tokenized assets as well.
South Korea Accelerates Won Stablecoin Push to Counter dollar dominance has become part of the bigger policy backdrop, while South Korea’s Crypto Overhaul: Stablecoins and Deregulation has already shown how quickly the debate is moving from theory to actual market plumbing. Meanwhile, South Korea weighs liquidity rules for won stablecoins as lawmakers and regulators hash out what “stable” should really mean in practice.
Key questions and takeaways
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Why are regulators focused on liquidity now?
Recent stablecoin trading in South Korea showed that even well-known tokens can swing far above their reference values when order books are thin. That pushed market structure, not just reserves, into the policy spotlight. -
Does a premium mean a stablecoin is broken?
Not necessarily. A local premium can reflect weak liquidity rather than a failure of backing. But repeated distortions still damage confidence and raise the odds of tighter rules. -
What safeguards are being discussed?
Market participants want minimum circulating supply, stronger issuance and redemption channels, market makers, visible deviation disclosures, and controls for unusual trading. -
Has South Korea finalized its stablecoin framework?
No. The FSC says key provisions are still unsettled, and the second-stage framework is still moving through the legislative process. -
What does “bank-led” mean?
It means banks would play the main role in issuing or overseeing won stablecoins, rather than leaving the job mainly to non-bank crypto firms. -
Why does this matter beyond stablecoins?
South Korea’s plans for tokenized securities and on-chain payment infrastructure may eventually rely on stablecoin rails. If those rails are weak, the rest of the system inherits the problem.
South Korea is now deciding whether stablecoin regulation should stop at reserve checks or extend to the mechanics of how these tokens trade once listed. That distinction matters. A stablecoin with weak liquidity may still look fine on paper, but in the real market it can behave like anything but stable.
