A Bank of Korea study released on the 3rd found that opening the stablecoin market could have a larger impact on the foreign exchange market. A stablecoin is a virtual asset that has the same value as legal tender. For dollar stablecoins, "$1 = 1 coin."
The Bank of Korea on this day released a report titled "The linkage between dollar stablecoins and foreign exchange markets: focusing on the role of global exchanges" and said, "If the structure of the domestic virtual asset market changes as participation by corporations and foreigners in domestic virtual asset exchanges expands in the future, the linkage between the stablecoin market and the foreign exchange market could strengthen."
The Bank of Korea analyzed cases in which dollar stablecoins are transacted directly with legal currency on the global virtual asset exchange Binance Holdings Ltd.. When a customer buys dollar stablecoins with the Brazilian real, the transaction intermediary sells the received real and buys dollars, and the study examined how this transaction affects the foreign exchange market.
The analysis found that this transaction structure leads to a depreciation of the home currency. If dollar stablecoins are bought with the real, it means the exchange rate rises as the real weakens.
In Korea, this effect has not yet appeared. This is because, under domestic regulations, there are no corporate transaction intermediaries. Domestically, individuals who respectively hold won and stablecoins transact directly without intermediaries. This is why analyses suggest that opening the domestic market would affect the foreign exchange market.
Instead, under this regulatory framework, because transactions occur only within domestic virtual asset exchanges, it has been analyzed to amplify the "kimchi premium." If demand to buy dollar stablecoins grows, people could end up buying or selling stablecoins at prices higher than the actual won-dollar exchange rate.