The Bank of Korea has found that demand for dollar-backed stablecoins can place downward pressure on local currencies. The effect becomes more pronounced when investors gain direct access through fiat trading pairs on global exchanges.
Researchers examined the impact following Binance’s introduction of pairs between selected national currencies and tokens such as USDT and USDC.
The Drivers of This Development
When exchanges enable direct purchases of dollar stablecoins with local fiat, investors can acquire the tokens without intermediate steps. Market makers who supply the stablecoins receive local currency and often rebalance by selling that currency for dollars in traditional foreign-exchange markets. This activity transmits buying pressure from the stablecoin market into the broader FX market, contributing to depreciation of the local currency. The Bank of Korea study measured declines in local stablecoin premiums of roughly 0.33 to 0.38 percentage points after such pairs were introduced. The strength of the spillover depended on market structure and the availability of direct trading access. For perspective, countries with active fiat-stablecoin pairs showed clearer exchange-rate responses, while markets lacking those pairs experienced mainly elevated local premiums instead.
It is important to note the fundamental difference between stablecoin demand absorbed within crypto markets and demand that forces intermediaries to adjust positions across traditional FX markets: only the latter creates measurable pressure on national exchange rates.
Impact and Broader Context
The findings highlight a potential new transmission channel between crypto activity and conventional currency markets, particularly for emerging-market currencies. South Korea itself showed limited exchange-rate impact due to the absence of a direct won-stablecoin pair on Binance, though local premiums rose with demand. The research suggests that as stablecoin adoption grows and more fiat pairs appear, the influence on local currencies could increase. Policymakers may need to monitor these linkages alongside traditional capital-flow and monetary-policy considerations.
This development sparks important discussions about the macroeconomic implications of dollar-denominated stablecoins. Supporters of wider stablecoin access argue that the efficiency gains in payments and savings outweigh localized FX effects, especially in economies with capital controls or high inflation. Critics and central banks warn that persistent demand for dollar tokens can accelerate currency substitution and complicate exchange-rate management. Analysts observe that the Bank of Korea’s evidence adds empirical weight to earlier theoretical concerns raised by institutions such as the IMF and BIS regarding stablecoin-driven spillovers.
Looking ahead, further research and the expansion of fiat-stablecoin trading pairs will determine how significant these effects become for different economies. This analysis is based on the Bank of Korea research note and related reporting for accuracy and reliability. The magnitude of any currency impact remains subject to market structure, intermediary capacity, and evolving stablecoin adoption patterns.