Stablecoin Demand Could Affect Won-Dollar Exchange Rate
The Bank of Korea has published an Issue Note titled 'Linkages Between Dollar Stablecoins and the Foreign Exchange Market,' examining the connection between dollar stablecoin demand and South Korea's won-dollar exchange rate. Researchers analyzed data from 2019 to 2025 covering 12 currencies, including the euro and Turkish lira.
The study found that after global cryptocurrency exchange Binance began supporting trades involving certain currencies, the premium between dollar stablecoin prices and spot foreign exchange rates narrowed by 0.33 to 0.38 percentage points. This was attributed to greater participation by global intermediaries, making stablecoin supplies more readily available.
The research also discovered that for currencies supported on Binance, greater net buying pressure for dollar stablecoins led to an increase in the exchange rate against the dollar, indicating depreciation of the local currency. However, for unsupported currencies, increased stablecoin demand primarily pushed up the stablecoin premium while having a limited effect on the foreign exchange rate.
The Bank of Korea warned that if corporations and foreign investors gain broader access to South Korea's domestic cryptocurrency market, the linkage between the stablecoin market and foreign exchange market could strengthen. This could have a more direct effect on the won-dollar exchange rate.