Dollar Stablecoins May Weaken Local Currencies, Korean Study Finds
A Bank of Korea study finds that direct fiat-to-dollar stablecoin trading pairs can create selling pressure on local currencies. When users buy USDT or USDC with currencies such as the Brazilian real or Turkish lira, market makers may sell the local currency and buy dollars to rebalance their positions.
The study, by researchers Jihyun Kim and Sangheum Cho, examined Binance’s launch of direct fiat-stablecoin pairs across 12 currencies between 2019 and 2025. After these pairs were introduced, stablecoin premiums on local exchanges fell by an average of 0.33 to 0.38 percentage points, indicating better liquidity and arbitrage efficiency but potentially greater foreign-exchange pressure.
The researchers also found that a one-standard-deviation rise in Bitcoin search interest was associated with a 0.118% depreciation in the Brazilian real and a 0.109 percentage-point increase in Brazil’s stablecoin premium. The relationship was stronger in countries with direct Binance fiat pairs.
South Korea currently has no direct Korean won-stablecoin pair on Binance, limiting the immediate exchange-rate impact. However, Chainalysis data shows that Korean won purchases of stablecoins reached $64 billion from July 2024 to June 2025. Researchers warn that wider market access could activate similar depreciation channels and recommend stronger foreign-exchange liquidity and greater international use of the won.
Bearish
The immediate market impact is likely bearish for local fiat currencies and mildly negative for crypto-market stability, although the study does not imply an automatic sell-off in Bitcoin or major tokens. Direct fiat-to-stablecoin pairs can increase dollar demand, especially during periods of strong crypto speculation, and may transmit pressure from crypto exchanges into foreign-exchange markets.
For short-term traders, the key indicators are stablecoin premiums, Binance-local exchange price gaps, fiat trading volumes, and USD exchange-rate movements. A narrowing premium usually signals more efficient arbitrage, but it can also indicate that market makers are handling larger stablecoin flows and may need to sell more local currency. Traders should also monitor regulatory announcements, new fiat pairs, and capital-flow restrictions in emerging markets.
The finding is comparable to past episodes in which dollar demand rose during periods of currency stress, although this research focuses on a specific crypto-related transmission channel rather than proving that stablecoins alone caused depreciation. South Korea’s current lack of a direct KRW pair limits near-term risk, but its $64 billion annual stablecoin purchase volume shows the potential scale. Over the long term, wider institutional access or bank-issued stablecoins could deepen liquidity while also increasing the speed at which crypto capital flows affect foreign exchange. The broader effect on global crypto prices remains neutral to slightly bearish unless regulators respond with tighter restrictions that reduce liquidity.