🔔 Dollar stablecoins can weaken local currencies, BOK finds

🔖 Demand for dollar-backed stablecoins can place downward pressure on national currencies when investors receive direct access through fiat trading pairs, according to research published by the Bank of Korea on Sept. 3. The effect appeared after Binance introduced trading between selected local currencies and stablecoins such as USDT and USDC.

➡️ The researchers found that direct fiat-stablecoin markets strengthened the connection between crypto demand and foreign exchange markets. Stablecoin premiums became smaller, but demand shocks also gained a route into conventional currency trading. The findings do not establish that stablecoin demand always causes currency depreciation. The measured relationship depended on market structure, access to global intermediaries and the availability of direct trading pairs.

🌐 Dollar stablecoins trade globally, but investors in many countries cannot always purchase them directly with local currency on a large international exchange. They may instead buy stablecoins through domestic platforms, peer-to-peer markets or intermediaries.