Dollar Stablecoins Erode Local Currency Exchange Rates

A study by the Bank of Korea found that rising demand for dollar-stablecoins can put pressure on local currencies. The researchers analyzed trading data from Binance, a popular cryptocurrency exchange, across 12 different currencies.

The study found that when market makers buy dollars to meet increasing demand for USDT and USDC, it can lead to selling of local currencies, thereby putting downward pressure on their exchange rates.

In fact, the researchers discovered that direct fiat-stablecoin listings on exchanges can reduce local stablecoin premiums by 0.33-0.38 percentage points.