Bank of Korea study suggests dollar-backed stablecoin trading activity may exert downward pressure on local currencies as market makers rebalance Binance holdings.
DeFi & Yields ·
The Bank of Korea has released a study examining the market effects of dollar-backed stablecoins, finding that increased buying activity in these assets may place downward pressure on local currencies. According to the research, market makers rebalancing positions—particularly those involving Binance holdings—contribute to this dynamic.
The mechanism operates through foreign exchange markets as traders purchase dollar-denominated stablecoins to manage exposure across venues. When market makers adjust their balances to maintain equilibrium, the cumulative effect can shift currency valuations in emerging markets or smaller economies. This pattern suggests stablecoin trading flows merit consideration as a structural factor in currency markets beyond traditional forex channels.
The study does not yet clarify the magnitude of this effect across different markets or time periods, nor does it specify which local currencies experience the most pronounced pressure. Questions remain about whether central banks should incorporate stablecoin flows into monetary policy frameworks, and whether the effect varies by stablecoin issuer or trading venue concentration.