Binance Stablecoin Pairs Linked to Local Currency Depreciation
The Bank of Korea has released an issue note highlighting the potential risks associated with direct fiat-to-stablecoin trading pairs on Binance. The study, led by Kim Jihyun and Cho Sangheum, found that when global market makers supply stablecoins to local investors through these pairs, it creates a channel for dollar-pegged stablecoin demand to affect foreign exchange markets.
According to the analysis, after Binance listed fiat-stablecoin pairs, local stablecoin premiums fell by roughly 0.33 percentage points. The data also showed that significant depreciation of paired currencies was associated with higher premiums. In particular, the study noted a median USD stablecoin premium of about 0.8 percent and Binance holding roughly 69 percent of USDT and USDC balances deposited across exchanges.
The researchers highlighted Korea as an exception to this pattern, as no direct Binance won-stablecoin pair is available. Instead, a crypto-demand shock raised the local stablecoin premium by about 0.85 percentage points with no statistically significant effect on the won-dollar exchange rate. The authors also mentioned that in Brazil, the same shock raised the premium by only about 0.11 points but depreciated the real by about 0.12 percent.
The study's findings have implications for stablecoin adoption and exchange activity, particularly as digital-asset markets open to corporate and foreign participation. The authors argue that efforts should be made to internationalize the won and deepen FX liquidity so the market can absorb shocks.