Key Takeaways
- • Bank of Korea researchers found that dollar-backed stablecoins reduce local stablecoin premiums by 0.33 to 0.38 percentage points when global exchanges like Binance enable direct fiat-to-stablecoin trading pairs, creating a direct transmission mechanism to FX markets.
- • Market makers arbitraging stablecoin demand must sell local currency and purchase dollars to balance positions, causing measurable local currency depreciation as buying pressure in paired currencies correlates with exchange rate weakness.
- • Won-denominated stablecoin purchases reached $64 billion in the 12 months through June 2025, establishing South Korea as the largest local-currency stablecoin market in the Asia-Pacific region, according to Chainalysis data.
- • A one standard-deviation increase in Bitcoin search volume—used as a proxy for cryptocurrency investment demand—linked to a 0.118% depreciation of the Brazilian real, demonstrating the spillover effect of crypto market activity on emerging-market currencies.
- • The study, conducted by Bank of Korea researchers Jihyun Kim and Sangheum Cho, identifies a previously underexamined channel through which stablecoin adoption affects sovereign currency values and exchange rate dynamics.
Summary
A Bank of Korea study published in early September 2026 reveals a direct mechanism through which dollar-backed stablecoins depress local currency valuations when major cryptocurrency exchanges facilitate direct fiat-to-stablecoin trading. Researchers Jihyun Kim and Sangheum Cho examined Binance's introduction of trading pairs between local currencies and dollar-pegged stablecoins such as USDT and USDC, finding that these listings create measurable downward pressure on national exchange rates.
The transmission mechanism operates through market maker behavior. When retail investors purchase stablecoins using local currency on Binance, professional market makers who supply liquidity must hedge their positions by selling that local currency and purchasing dollars in FX spot markets. This systematic selling pressure by market makers balancing their books creates a direct link between stablecoin demand and local currency depreciation. The study quantifies this effect: Binance fiat-stablecoin pair listings reduced local stablecoin premiums—the markup investors pay for stablecoins on local exchanges—by 0.33 to 0.38 percentage points.
The research also identifies secondary price discovery mechanisms. When local market prices for stablecoins rise above Binance levels, the tokens flow from Binance to domestic exchanges, suggesting that broader cryptocurrency market sentiment propagates through stablecoin trading patterns. Using Bitcoin search volume as a proxy for investment demand, the researchers found that a one standard-deviation increase in search interest correlated with a 0.118% depreciation of the Brazilian real, illustrating how crypto market participation can amplify currency volatility in emerging markets.
South Korea provides a particularly salient case study. Won-denominated stablecoin purchases reached $64 billion over the 12-month period through June 2025, making South Korea the dominant local-currency stablecoin market in Asia-Pacific. This elevated adoption rate means South Korean policymakers face material exposure to the currency effects the Bank of Korea study documents. The findings carry implications for monetary policy transmission, capital controls, and the degree to which decentralized financial infrastructure can circumvent or complicate traditional central bank tools.
The transmission mechanism operates through market maker behavior. When retail investors purchase stablecoins using local currency on Binance, professional market makers who supply liquidity must hedge their positions by selling that local currency and purchasing dollars in FX spot markets. This systematic selling pressure by market makers balancing their books creates a direct link between stablecoin demand and local currency depreciation. The study quantifies this effect: Binance fiat-stablecoin pair listings reduced local stablecoin premiums—the markup investors pay for stablecoins on local exchanges—by 0.33 to 0.38 percentage points.
The research also identifies secondary price discovery mechanisms. When local market prices for stablecoins rise above Binance levels, the tokens flow from Binance to domestic exchanges, suggesting that broader cryptocurrency market sentiment propagates through stablecoin trading patterns. Using Bitcoin search volume as a proxy for investment demand, the researchers found that a one standard-deviation increase in search interest correlated with a 0.118% depreciation of the Brazilian real, illustrating how crypto market participation can amplify currency volatility in emerging markets.
South Korea provides a particularly salient case study. Won-denominated stablecoin purchases reached $64 billion over the 12-month period through June 2025, making South Korea the dominant local-currency stablecoin market in Asia-Pacific. This elevated adoption rate means South Korean policymakers face material exposure to the currency effects the Bank of Korea study documents. The findings carry implications for monetary policy transmission, capital controls, and the degree to which decentralized financial infrastructure can circumvent or complicate traditional central bank tools.
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