Binance Stablecoin Pairs Exert Hidden Influence on Currency Markets
The Bank of Korea has released an analysis on how Binance stablecoin pairs impact currency markets. According to the study, when Binance lists a fiat-stablecoin pair, it creates a direct channel linking crypto demand to foreign exchange markets.
When local investors buy stablecoins through a Binance fiat pair, the demand doesn't stay contained inside crypto markets. It spills into currency trading, and that spillover is what researchers sought to measure.
The study found that once Binance added a fiat-stablecoin pair, local stablecoin premiums fell by around 0.33 percentage points on average, while higher premiums tended to line up with meaningful depreciation of the paired currency.
Korea and Brazil offer contrasting examples: South Korea lacks a direct won-stablecoin pair, which increases the local stablecoin premium without significantly affecting the won-dollar exchange rate. In contrast, Brazil's smaller 0.11-point premium increase still coincided with roughly 0.12% depreciation of the real.
The study recommends that policymakers deepen FX liquidity and push forward efforts to internationalize the won, so the currency market can absorb shocks if a direct won-stablecoin pair eventually appears.