Korea's Virtual Asset Market Opening May Rattle Won-Dollar Exchange Rates

The Bank of Korea has released an analysis on the potential impact of opening up South Korea's virtual asset market to corporations and foreigners. The research, led by the International Finance Research Team, found that demand shocks for dollar stablecoins like Tether (USDT) could transmit into won-dollar exchange rate movements.

The study compared conditions before and after Binance began supporting direct trading between specific fiat currencies and dollar stablecoins in 2019. The analysis covered 12 currencies, including the euro, Turkish lira, and South African rand, spanning from 2019 to 2025.

The findings showed that when global intermediaries entered the market, price gaps narrowed by 0.33-0.38 percentage points. However, the channel through which shocks transmit to FX markets strengthened. Rising premiums led to depreciation of the local currency against the dollar, as global intermediaries sold the local currency in FX markets and bought dollars.

The research team noted that South Korea's stablecoin premium is unusually high at 1.67%, more than double the median of roughly 0.8% across 30 comparison currencies. This is attributed to restrictions on corporate and foreign participation in South Korea's virtual asset market, which has left a shortage of global intermediaries capable of accessing both the stablecoin market and the FX market.