Stablecoin Surge Triggers Exchange Rate Pressure

A recent study by the Bank of Korea found that dollar-backed stablecoins could put pressure on local currencies when exchanges allow direct fiat purchases.

Researchers examined 12 currencies on Binance, including Brazil's real, and tracked trading involving USDT and USDC. They discovered a link between dollar-stablecoin demand and foreign-exchange markets.

When demand rises, market makers can sell local currencies to buy dollars, adding pressure to exchange rates. The study found that direct fiat-stablecoin listings cut local stablecoin premiums by about 0.33 to 0.38 percentage points.

The researchers also observed that stablecoins moved towards local exchanges when prices exceeded Binance levels. However, South Korea showed a different pattern because Binance lacks a direct won-stablecoin pair, resulting in weaker evidence of direct pressure on the won.