Bank of Korea Study Finds Stablecoin Demand Can Weaken Local Currencies

Stablecoin demand does not necessarily weaken a local currency on its own. The Bank of Korea’s latest research points to a more specific condition: demand becomes an exchange-rate force when market infrastructure gives it a direct route from local fiat into a US dollar-linked stablecoin.

That distinction is consequential. In the Bank of Korea’s sample, higher stablecoin premia were associated with significant depreciation in local currencies after a global exchange introduced direct fiat-to-USD-stablecoin trading pairs. Korea, however, did not show a statistically significant exchange-rate effect during the period studied because Binance did not offer a direct won–USD stablecoin pair. Korean demand appeared instead in the premium paid for stablecoins.

The contrast makes the central issue less about whether a stablecoin is used and more about how users reach it. A premium can signal strong demand while remaining primarily a price dislocation within crypto markets. A liquid direct fiat pair can convert the same demand into an FX transaction. That is the transmission channel policymakers need to assess.

… Continue reading the full article at the original source below.