Dollar Stablecoin Demand Weakens Local Currencies
A recent study by the Bank of Korea found that demand for dollar-backed stablecoins can weaken local currencies when investors have direct access through fiat trading pairs.
The research, which examined 12 currencies between 2019 and 2025, discovered that direct fiat-stablecoin markets strengthened the connection between crypto demand and foreign exchange markets.
When market makers could sell received local currencies for dollars while balancing stablecoin trading positions afterward, a shock-transmission channel emerged, allowing buying pressure to pass into exchange rates.
The study found that local stablecoin premiums declined by 0.33-0.38 percentage points following the introduction of Binance fiat pairs, indicating stronger price integration between global and domestic stablecoin markets.