Demand for dollar-backed stablecoins can push national currencies lower once a global exchange lets investors buy the tokens directly with local money, a Bank of Korea study published September 3 found.
Researchers Jihyun Kim and Sangheum Cho from the central bank’s International Department examined 12 currencies with enough cross-exchange trading history, covering Binance fiat-stablecoin pairing dates from 2019 to 2025. The tokens at the center of the study were Tether’s USDT and Circle’s USDC. Their working paper, titled “BOK Issue Note: Linkages Between Dollar Stablecoins and the Foreign Exchange Market,” describes a transmission channel that runs through professional market makers rather than retail investors themselves.
When a fiat-stablecoin pair goes live, market makers sell stablecoins to local buyers and receive local currency. To restore their dollar positions, those market makers then sell the local currency in the foreign exchange market. That sequence connects stablecoin demand directly to currency depreciation. Across the 12 currencies studied, local stablecoin premiums fell by 0.33 to 0.38 percentage points after Binance introduced the fiat pairs, a sign of tighter integration between domestic and global markets. Where local stablecoin prices climbed above the global exchange’s price, coins flowed across platforms to close the gap, classic arbitrage behavior.
Brazil felt it, Korea did not
The contrast between Brazil and South Korea frames the findings. Brazil has a direct Binance pairing for the real, so crypto demand fed through into actual dollar purchases. Using weekly data, the researchers measured that a one-standard-deviation rise in Google searches for bitcoin, used as a proxy for investment demand, was associated with a 0.118% depreciation of the real and a 0.109 percentage point increase in Brazil’s stablecoin premium.
South Korea lacks a direct Binance won-stablecoin pair. The same demand shock raised the local stablecoin premium by about 0.85 percentage points but had no statistically significant effect on the won. Korean investors trade existing holdings among themselves, so buying pressure shows up in prices rather than in the exchange rate.
The effect extends beyond stablecoins. In a separate test using weekly data, the researchers found crypto investment demand proxies moved both premiums and currency pairs in markets with direct fiat access, reinforcing that the transmission channel exists whenever local currency can be converted to dollar tokens without leaving the country.
Why it matters for Seoul
The findings land in the middle of Korea’s debate over opening its crypto market. Won purchases of stablecoins reached $64 billion in the 12 months through June 2025, making Korea the largest local-currency stablecoin market in Asia-Pacific according to Chainalysis data cited by CoinDesk. Corporations and foreign investors remain largely shut out of domestic exchanges, which limits the pass-through to the won for now.
“If the market structure changes, for instance through wider participation by corporations and foreign investors in domestic crypto exchanges, the link between the stablecoin market and the foreign exchange market could strengthen,” Kim said in the report. She recommended pairing any overhaul of digital asset rules with work on internationalizing the won and improving FX market structure so the market can absorb shocks.
Similar warnings appeared elsewhere this week. Korea’s budget office said stablecoin adoption could save merchants up to $3.8 billion a year in fees but flagged that mass redemptions could destabilize token pegs and reduce banks’ role as credit intermediaries. Regulators in Seoul are drafting legislation for won-backed tokens, and the central bank has pushed for a supervisory role. Japanese policymakers reached a similar conclusion earlier this year when drafting their own stablecoin review.
The authors stressed their results do not mean stablecoin demand automatically weakens a currency. The effect depends on market structure, liquidity and access to international intermediaries. But the paper adds hard data to a policy question most central banks have only debated in theory: as stablecoins embed deeper into payments, currency management becomes part of crypto regulation. For emerging markets with thin FX reserves, the risk is larger than for economies with deep liquid currency markets, which is where most of the future growth in stablecoin usage is expected.
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