Investors lose W5b after buying yen stablecoin JPYC at four times its value

An investor who bought 10 million won ($7,350) worth of JPYC — a yen-pegged stablecoin — on Upbit at its peak price of 37.60 won per token on Sept. 17 would now hold assets worth only about 2.29 million won. The coin, designed to track 1 yen in value — roughly 8.86 won at the time — surged more than fourfold immediately after listing before falling back to the 8-won range, wiping out about 77 percent of the original investment.

The scale of investor losses has now been confirmed. A total of 21,219 investors bought JPYC at prices more than 10 percent above its yen-based reference price. Of those, 3,792 who had not sold their holdings by Monday still face an average unrealized loss of 1.33 million won each, with total estimated losses of about 5.03 billion won.

Retail investors who entered the market trusting both the "stablecoin" label — implying price stability — and the sharp post-listing rally ended up bearing the full cost of a price distortion caused by a shortage of tradable supply.

Data submitted to Democratic Party of Korea lawmaker Park Min-gyu of the National Assembly's Political Affairs Committee on Sunday showed that between Sept. 17 and Monday, 21,219 unique investors — excluding duplicates — bought JPYC at prices more than 10 percent above the reference rate derived from the won-yen exchange rate. Those investors purchased a combined 12.76 billion JPYC tokens for a total of 259.86 billion won.

77% of high-price purchases made at more than double the yen's value — JPYC is a yen stablecoin designed to maintain a value of 1 yen per token. It is issued against collateral including yen deposits and Japanese government bonds and can be redeemed in yen.

Despite the stablecoin designation, the trading price on Upbit diverged sharply from the yen's value immediately after listing, as a flood of buy orders hit the market when tradable supply was insufficient.

In the five days after listing, 2,574 investors bought JPYC at prices more than 300 percent above the reference price, spending a combined 8.26 billion won.

In the range of 200 to 300 percent above the reference price, 11,449 investors purchased 85.42 billion won worth of tokens. Another 13,728 investors bought 105.86 billion won worth in the 100-to-200 percent range.

Purchases made at more than double the yen reference price totaled about 199.55 billion won ($147 million) — representing 76.8 percent of all high-price buying.

At 50 to 100 percent above the reference price, 5,542 investors bought 26.95 billion won worth of JPYC. In the 25-to-50 percent range, 3,223 investors spent 18.24 billion won, while 3,605 investors purchased 15.12 billion won worth in the 10-to-25 percent range.

Investors who bought at multiple price levels were counted in each applicable bracket, so the bracket totals include duplicates. The overall figure of 21,219 investors excludes such duplicates.

After a fourfold surge, price falls to 8-won range — 3,792 investors left holding losses — JPYC, which had soared to 37.60 won immediately after listing, tumbled to around 9 won within a single day as more supply entered circulation. By Saturday, the price had fallen to around 8.6 won, in effect converging with the yen's actual value.

While the price normalized, investors who bought near the peak could not escape losses. As of Monday, 3,792 investors still held JPYC. Their average unrealized loss stood at 1.33 million won, and the combined unrealized loss was estimated at about 5.03 billion won.

Only 7,006 investors — 33 percent of all high-price buyers — locked in a profit by selling during the period. Their average realized gain was 453,687 won. Because realized-loss figures were not separately tracked, the actual scale of investor losses could exceed 5.03 billion won.

The immediate cause of the price spike was the thin supply available at launch. Unlike some tokens, JPYC is not issued automatically to meet exchange demand. New tokens are created only after a user registers on the issuing platform, completes identity verification and pays in yen.

The JPYC issuer said it had not known Upbit's exact listing time in advance and was therefore unable to prepare sufficient supply. The resulting shortage drove prices sharply higher as buy orders piled in. Prices later returned to normal as arbitrageurs began acquiring JPYC in Japan at 1 yen per token and selling it at a premium on the domestic exchange.

On the day of listing, 1.69 billion new JPYC tokens were issued — more than 12 times the previous single-day record. Total circulating supply grew by 18 percent in a single day.

The average daily trading volume for JPYC, which had been about 226 million won in the 11 months before listing, jumped to around 45 billion won after the domestic listing. The volume of JPYC transfers also jumped more than 83-fold following the listing announcement.

Investors thought they were buying yen exposure — they paid four times the price; retail investor protections fall short — The core problem is that ordinary investors have no easy way to immediately gauge the premium embedded in exchange asking prices. Buyers who believed they were purchasing an asset pegged to the yen in fact paid up to four times the yen's actual value.

Acquiring JPYC directly at 1 yen per token — or redeeming it in yen — requires registering on the official platform, completing identity verification and linking a bank account and personal wallet. Domestic retail investors are not well positioned to engage in immediate arbitrage outside the exchange or to redeem tokens in yen.

As a result, domestic investors had little choice but to rely on the price formed within the exchange. The stablecoin's reputation for price stability may have further lowered their guard against risk.

Industry observers say exchanges should thoroughly review the initial tradable supply and the issuance and redemption structure before listing a stablecoin. They argue that trading screens should display the reference price based on the won-yen exchange rate and the deviation from it in real time, and that mechanisms should be in place to show a warning or restrict trading when the price gap exceeds a certain threshold.

"The fact that a stablecoin — premised on price stability — traded at more than 300 percent above its reference price means the listing process should have included a far more rigorous review of circulating supply and related factors," a senior official at one exchange said. "The end result was that investors bought in at elevated prices and were left holding the losses."