Dollar‑linked stablecoins can pressure local currencies when traded directly with fiat

Bank of Korea researchers found that direct trading pairs between fiat currencies and dollar‑backed stablecoins on Binance can transmit crypto‑related buying pressure into foreign‑exchange (FX) markets, creating downward pressure on the local currency.

How direct fiat‑stablecoin pairs work

When Binance adds a pair such as BRL/USDT or MXN/USDC, market makers receive the local currency in exchange for the stablecoin. To hedge the fiat exposure, they sell the local currency for dollars in the conventional FX market. This creates a “shock‑transmission” channel: stablecoin buying demand is accompanied by a sale of the local currency.

Observed effects on premiums and exchange rates

• Local stablecoin premiums fell by roughly 0.33–0.38 percentage points after the introduction of Binance fiat pairs, indicating tighter price integration with global markets.
• Net buyer‑initiated stablecoin order flow was statistically associated with depreciation of the paired currencies.
• In a separate test using Google searches for Bitcoin as a proxy for crypto interest, a one‑standard‑deviation rise in search activity correlated with a 0.118 % depreciation of the Brazilian real and a 0.109‑percentage‑point increase in Brazil’s stablecoin premium.

Contrast with markets lacking direct pairs

South Korea, where Binance did not offer a won‑stablecoin pair during the study period, showed no measurable exchange‑rate impact. Instead, stablecoin demand primarily raised the domestic premium, supporting the argument that the transmission effect depends on market structure and direct access.

Implications for regulators and markets

The findings suggest that expanding direct fiat‑stablecoin trading can link digital‑asset demand to traditional FX flows, creating a new capital‑movement channel. Regulators may need to consider how such channels affect monetary stability, especially in jurisdictions where stablecoins are used to preserve purchasing power amid inflation or capital controls.