Dollar Stablecoins Weaken Local Currencies, BOK Finds
The Bank of Korea has published research that shows dollar-backed stablecoins can weaken local currencies. The study found that when investors have direct access to trade stablecoins through fiat pairs, it puts downward pressure on national currencies.
Researchers examined 12 currencies and found that the introduction of Binance's trading between selected local currencies and stablecoins such as USDT and USDC led to a decline in local stablecoin premiums by 0.33-0.38 percentage points. The study also showed that net buyer-initiated stablecoin order flow was associated with depreciation among paired currencies.
The researchers described this as a shock-transmission channel, where buying pressure mainly affected the domestic stablecoin premium before direct pairing, and after pairing, some of the pressure passed into the exchange rate.