The Bank of Korea has released its latest research, directly calling out dollar-backed stablecoins: when exchanges allow users to buy USDT and USDC with fiat currency, market makers’ arbitrage will dump local currency into the foreign exchange market, pushing down the exchange rate of that country.
The central bank’s model shows that after fiat on-ramps are opened, the local stablecoin premium fell by about 0.33 to 0.38 percentage points. Another weekly-data finding is that for every one standard deviation increase in Bitcoin search interest, the Brazilian real depreciated by an average of 0.118%, while the stablecoin premium rose at the same time.
What does this mean? Stablecoins are no longer just a trading medium in the crypto world. They are becoming an entry point for “digital dollars,” channeling pressure to exchange local currency directly into the foreign exchange market.
What is even more noteworthy is that this research was conducted by the Bank of Korea itself, not by academics. The regulatory framing may be shifting from “stablecoins are a technological innovation” to “stablecoins are a monetary policy variable.”
One question: if stablecoins really do weaken local currencies, will central banks first restrict exchanges’ fiat channels, or directly block stablecoins themselves?
The central bank’s model shows that after fiat on-ramps are opened, the local stablecoin premium fell by about 0.33 to 0.38 percentage points. Another weekly-data finding is that for every one standard deviation increase in Bitcoin search interest, the Brazilian real depreciated by an average of 0.118%, while the stablecoin premium rose at the same time.
What does this mean? Stablecoins are no longer just a trading medium in the crypto world. They are becoming an entry point for “digital dollars,” channeling pressure to exchange local currency directly into the foreign exchange market.
What is even more noteworthy is that this research was conducted by the Bank of Korea itself, not by academics. The regulatory framing may be shifting from “stablecoins are a technological innovation” to “stablecoins are a monetary policy variable.”
One question: if stablecoins really do weaken local currencies, will central banks first restrict exchanges’ fiat channels, or directly block stablecoins themselves?