Bank of Korea Highlights Impact of Dollar-Denominated Stablecoin Demand on Exchange Rates

The Bank of Korea recently pointed out that the demand for dollar-denominated stablecoins has a pathway to depress various national currencies.

The bank has examined 12 currencies that global exchanges have allowed for direct purchases in local currencies, noting that after their introduction, the local stablecoin premium has decreased by 0.33 to 0.38 points. Since the won does not have direct pairs, no significant impact on exchange rates has been confirmed.

The study was published as an issue note and was conducted by the bank's international financial research team. The analysis included 12 currencies, including the euro and the Turkish lira, using data from 2019 to 2025.

According to the bank, trading dollar-denominated stablecoins for a certain currency is similar to trading dollar-denominated assets in that currency. Whether intermediaries are involved can lead to actual foreign exchange transactions and fluctuations.

The impetus for this was the introduction of direct trading between fiat currencies like the Brazilian real and stablecoins such as USDT and USDC by Binance, the world's largest cryptocurrency exchange. Investors can now purchase stablecoins in local currencies, with market makers providing the supply.

Market makers sell local currencies and buy dollars in the foreign exchange market to balance their positions. This creates a pathway for the demand for stablecoins to affect exchange rates.

After the introduction of pairs, the local premium decreased by 0.33 to 0.38 points. For currencies with pairs on Binance, pure buying pressure led to a depreciation of the local currency alongside an increase in the premium.

In contrast, for currencies like the won that do not have pairs, only the premium increased, and the impact on exchange rates was limited.

The use of stablecoins in South Korea is rapidly expanding. According to data from blockchain analysis firm Chainalysis, the amount purchased in won is expected to reach $64 billion over the 12 months leading up to June 2025, making it the largest local currency market in the Asia-Pacific region.

In Japan, yen-denominated tokens like JPYC are also starting to move, and the presence or absence of pairs influences the outcomes.

In another analysis, the number of Google searches for Bitcoin was used as a proxy indicator for investment demand. A one standard deviation increase in search volume led to a 0.118% depreciation of the Brazilian real, while the premium in that country rose by 0.109 points.

The authors noted that as liquidity in the foreign exchange market deepens and the overseas use of the won expands, the connections may strengthen, making it easier to absorb shocks.

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