Dollar Stablecoins Hit Forex Markets: What the Bank of Korea Study Found

Dollar stablecoins can act as a bridge between the crypto market and traditional foreign exchange. That is the central finding of a new study from the Bank of Korea: when a local currency can be traded directly against USDT or USDC on a global exchange, buying pressure originating in crypto can propagate into the forex market through the hedging operations of global market makers.

One important caveat: the study does not claim that buying USDT automatically weakens a national currency. It demonstrates something more precise. Market structure determines where that pressure ends up. It can stay confined within the local stablecoin premium, or, when globally active intermediaries operate across both markets, it can transform into genuine dollar demand.

What the Bank of Korea Actually Found

Published on September 3, 2026 by Jihyun Kim and Sangheum Cho from the International Department of the Bank of Korea, the paper analyzes 12 currencies and the introduction of fiat-stablecoin trading pairs on Binance between 2019 and 2025. The premise is straightforward: using euros, Brazilian reais, or another currency to buy a dollar-pegged stablecoin is economically similar to purchasing a dollar-denominated asset with that same currency.

The decisive difference lies in who sits on the other side of the trade. Binance allows global liquidity providers and market makers, already active in both stablecoin and forex markets, to supply the liquidity demanded by local investors. This connection is what creates the potential bridge between the two markets. For readers who want to start from the basics, our stablecoin guide explains how USDT, USDC, and other fiat-pegged tokens work.

The Key Mechanism Lives on Market Maker Balance Sheets

Picture a rapid surge in demand for USDT from investors using Brazilian reais. The market maker sells the stablecoins and receives reais in return. That intermediary may not want to hold a growing position in the Brazilian currency. To neutralize the risk, the market maker can sell the reais in the FX market and buy dollars. A transaction that began on a crypto exchange produces a second transaction in the forex market.

The Bank of Korea separates this phenomenon into two channels. The first is price integration: with more arbitrage and international liquidity, the local stablecoin price converges toward the spot exchange rate. The second is shock transmission: a share of the crypto demand is absorbed through intermediaries' FX operations and can therefore reach the national currency's exchange rate directly.

South Korea Is the Counterexample That Explains Everything

The most instructive part of the study comes from the Korean market itself. South Korea has no direct won-stablecoin pair on Binance comparable to those used in the main analysis. The result: when buying pressure on stablecoins rises, the shock does not transfer to the currency market in the same way.

The pressure shows up primarily as a higher USDT and USDC premium on local exchanges, while the study finds no significant effect on the won's exchange rate. The distinction matters enormously. It is not the stablecoin alone that creates the link with forex. Global intermediaries are required, along with simultaneous access to both markets and a structure that allows positions received on the crypto exchange to be hedged on the currency market.

Brazil Shows How the Shock Can Escape from Crypto

To further test the mechanism, the authors also use weekly data from Brazil. Google searches related to Bitcoin serve as a proxy for investor interest in the crypto market. According to the Bank of Korea paper, a one-standard-deviation increase in this indicator is associated with a 0.118% depreciation of the Brazilian real and, simultaneously, a 0.109 percentage point rise in the local stablecoin premium.

These figures require careful interpretation. They do not mean that a rise in Bitcoin searches mechanically causes a 0.118% currency depreciation, nor that the same coefficient applies to the euro, the won, or other currencies. The result is designed to show that a crypto demand shock can leave a simultaneous footprint in both the stablecoin market and the forex market, consistent with the transmission mechanism the authors identify.

For Europe, the Problem Does Not End with MiCA

The issue is especially relevant for Europe because the global stablecoin market remains dollar-dominated. In May 2026, ECB President Christine Lagarde noted that the sector had surpassed $300 billion, that stablecoins are denominated in USD by a wide majority, and that nearly 90% of the market is concentrated among the two largest issuers, according to remarks reported in May 2026. The ECB explicitly links this growth to financial stability and monetary sovereignty concerns. The debate connects directly to questions already raised about competition between stablecoins and bank deposits in major European economies.

MiCA regulates e-money tokens within the EU, meaning crypto-assets designed to maintain a stable value relative to a single official currency. But the Korean paper shows that monitoring issuers and reserves is not enough to capture all monetary effects. Exchanges, fiat pairs, market makers, arbitrage, and FX liquidity all need to be part of the picture. The question grows more concrete as European initiatives such as Revolut's EURR take shape and as 21 major financial institutions prepare a new shared stablecoin infrastructure.

The Bigger Picture

The real novelty of the paper is not a claim that stablecoins control exchange rates. They don't. Inflation, interest rates, monetary policy, international trade, capital flows, and geopolitical risk remain forces of an entirely different magnitude. What the paper does establish empirically is that the boundary between the crypto market and the currency market can become permeable when market microstructure allows intermediaries to transfer pressure from one market to the other.

For central banks, this reshapes how USDT, USDC, and whatever comes next should be evaluated. A dollar stablecoin is not only a token used to buy crypto. It can also serve as a gateway to dollar liquidity and a channel for non-traditional capital flows. As these markets grow, the regulatory question becomes twofold: not just who issues the stablecoin and what reserves back it, but also who absorbs the demand, how that risk is hedged, and in which market that hedge ultimately lands.