Bank of Korea Warns of Potential Weakening of Won Amid Rising Demand for Dollar Stablecoins

According to research by the Bank of Korea, an increase in demand for dollar-linked stablecoins could lead to a decline in the value of local currencies such as the won. An analysis of Binance's introduction of direct trading between the Brazilian real and dollar stablecoins revealed that stablecoin demand could impact the foreign exchange market. The researchers explained that the pressure to buy stablecoins could increase the incentive to sell local currencies and buy dollars in the foreign exchange market, potentially leading to a weakening of the won. Additionally, they noted that since the introduction of Binance, the price premium of stablecoins in local exchanges has decreased by approximately 0.33 to 0.38 percentage points. In South Korea, the volume of stablecoin purchases in won is expected to reach $64 billion from July 2024 to June 2025, but currently, there is no direct trading between the won and dollar stablecoins. The researchers emphasized that the impact of stablecoin demand on exchange rates is less significant than its effect on price premiums. They added that if the connection between stablecoins and the foreign exchange market strengthens in the future, it could help expand the overseas use of the won and enhance liquidity in the foreign exchange market.

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