Stablecoin Demand Can Weaken Local Currencies When Market Infrastructure Allows Direct Conversion

The Bank of Korea studied the relationship between stablecoin premiums and exchange rates. The study found that when market infrastructure gives users a direct route from local fiat into a US dollar-linked stablecoin, demand for the token can weaken a local currency.

This is not a general claim that stablecoins mechanically depreciate every currency. The Bank of Korea's finding concerns an association following the addition of direct pairs; it does not establish that stablecoin adoption alone is sufficient to explain a local currency's movements.

Korea, however, did not show a statistically significant exchange-rate effect because Binance did not offer a direct won, USD stablecoin pair. Instead, Korean demand appeared in the premium paid for stablecoins.