BOK: Stablecoin Trading on Overseas Exchanges Impacts Exchange Rates

The Bank of Korea (BOK) has analyzed that the support of trading between a specific country's fiat currency and stablecoins on global virtual asset exchanges can also impact the foreign exchange market.

In a report titled "Linkage Between Dollar Stablecoins and the Foreign Exchange Market" released today (September 3), the BOK presented this analysis based on data from 2019 to 2025 for 12 currencies, including the euro and the Turkish lira, which are supported for trading on the overseas exchange Binance.

Trading dollar stablecoins using a specific currency is similar to trading dollar-denominated assets in that currency, and depending on whether global intermediaries participate, it can potentially lead to actual foreign exchange transactions and exchange rate fluctuations, the findings showed.

The report examined the impact by noting that when a specific fiat currency begins to be supported for trading on Binance, a market structure is formed where global intermediaries capable of accessing both the dollar stablecoin market and the foreign exchange market participate.

This was based on the observation that, unlike domestic virtual asset exchanges, overseas virtual asset exchanges such as Binance feature the active involvement of global intermediaries such as liquidity providers (LPs), professional market makers, and hedge funds to ensure smooth trading.

According to the research, the support of fiat currency trading on Binance significantly reduces the "premium"—the price difference between dollar stablecoins and the spot exchange rate—by enabling the participation of global intermediaries.

Furthermore, the participation of global intermediaries with access to the foreign exchange market causes stablecoin demand shocks to impact exchange rates, thereby strengthening the relationship between the supported fiat currency and the US dollar exchange rate, the study found.

For fiat currencies supported on Binance, when net buying pressure for stablecoins arose, the stablecoin premium increased while the local currency weakened, causing the exchange rate to rise.

On the other hand, for unsupported currencies like the South Korean won, under the same circumstances, only the stablecoin premium increased while the impact on the exchange rate remained limited.

As such, the domestic virtual asset market has limited participation from foreigners and corporations and lacks global intermediaries, resulting in a minimal impact on exchange rates from virtual asset market volatility.

Cho Sang-heum, head of the International Finance Research Team at the BOK, explained, "This suggests that if the market structure changes, such as through expanded participation by corporations and foreigners in domestic virtual asset exchanges, the linkage between the stablecoin market and the foreign exchange market could be strengthened."

He added, "The internationalization of the won and improvements to the foreign exchange market structure will expand the market participant base and foreign exchange market liquidity, thereby buffering shocks arising from the linkage between the two markets," and noted, "This needs to be viewed as a task intertwined with the restructuring of virtual asset regulations."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.