The Bank of Korea recently released a study stating that after US dollar stablecoins gain direct purchasing channels in local currencies, they may no longer only affect crypto market prices but also transmit some of the buying demand to the foreign exchange market, putting downward pressure on the local currency exchange rates. The study covers 12 currencies from 2019 to 2025, with a focus on observing the changes before and after the launch of Binance for transactions between fiat currencies and USDT, USDC, and other pairs.
Direct trading pairs change the transmission path
Research indicates that in the absence of direct access to fiat currencies through large international platforms, investors typically purchase stablecoins through local exchanges, over-the-counter markets, or intermediaries. This segmentation can easily drive up the prices of local stablecoins, resulting in a premium that exceeds the spot exchange rates.
However, after the launch of direct fiat currency trading pairs on Binance, global market makers will be able to sell stablecoins to investors directly. Upon receiving the local currency, they can then sell that currency in the foreign exchange market and buy US dollars to hedge their positions. As a result, the buying demand for stablecoins that previously remained in the local cryptocurrency market could potentially turn into selling pressure for that same currency in the foreign exchange market.
The study defines this process as a new conduit for transmission. The results show that among the currencies that have established direct trading pairs, there is a statistical association between net active buying of stablecoins and the depreciation of the local currency.
Local premiums decline, market linkage strengthens
The study also found that after the direct trading was enabled, the premium of local stablecoins decreased by approximately 0.33 to 0.38 percentage points overall. This means that local market prices are closer to the spot exchange rates, global liquidity can more easily enter the local market, and cross-platform price differences are also smoothed out more quickly.
Research indicates that when the price of stablecoins on local exchanges is higher than Binance, funds tend to flow from Binance to local platforms. Traders can buy in at the lower-priced market and then sell at the higher-priced market. As a result, price consistency improves, but so does the connection between local demand for cryptocurrencies and the global foreign exchange market.
In a weekly test, researchers also used the search popularity of Bitcoin on Google as a proxy indicator for interest in crypto investments. The results showed that for every standard deviation increase in search popularity, the Brazilian real depreciated by 0.118%, while the premium of local stablecoins increased by 0.109 percentage points.
The South Korean market mainly absorbs demand through premiums.
South Korea serves as a control sample in the research. During the observation period, since Binance did not provide a direct trading pair for Korean won against stablecoins, South Korean investors mainly purchased stablecoins through indirect channels such as local exchanges.
Research has found that there is no significant statistical relationship between the buying demand for stablecoins in the Korean market and the exchange rate of the Korean won. On the contrary, the increase in demand is more reflected in the widening premium of local stablecoins. This means that in the absence of international platforms directly accepting the Korean won, market makers also do not have the same need for foreign exchange hedging.
However, the demand for local stablecoins in South Korea is already considerable. According to Chainalysis data, within the past 12 months up to June 2025, the purchase volume of stablecoins denominated in Korean won was approximately 64 billion US dollars, making South Korea one of the largest domestic stablecoin markets in the Asia-Pacific region.
South Korean regulatory discussions are still ongoing.
The Bank of Korea stated that if the market is further opened to enterprises and overseas investors in the future, the existing situation may change. The South Korean National Assembly is also currently advancing legislation regarding digital assets, which covers stablecoin issuers, reserve standards, and regulatory arrangements.
The Bank of Korea previously favored banks to lead the early issuance of Korean won stablecoins, on the grounds that it was necessary to balance monetary and financial stability. This research further indicates that once stablecoins are directly connected to fiat currencies, they will not only change the pricing in the crypto market but may also become a new channel for cross-border capital flows.
