Dollar-backed stablecoins may weaken local currencies, Bank of Korea study warns

A new study by the Bank of Korea has found that dollar-backed stablecoins can exert downward pressure on local currencies. The research focuses on trading activity on Binance, where buying pressure in stablecoin-paired currencies shows a correlation with local currency depreciation. The mechanism appears to be driven by market makers rebalancing their positions in response to stablecoin demand. The findings raise concerns about the broader macroeconomic impact of stablecoin adoption in emerging and developing economies.