Dollar-backed stablecoins could erode the value of local currencies if major global exchanges offer direct fiat trading pairs, according to a recent research report from the Bank of Korea (BOK).

The study highlights concerns about monetary sovereignty as stablecoins — crypto tokens pegged to the US dollar, such as USDT and USDC — become more widely used in global transactions. The findings are also covered in a related report: Bank of Korea Warns Dollar Stablecoin Demand Can Move Exchange Rates. The issue is not unique to Korea: because the largest stablecoins are denominated in US dollars, any economy where users can easily swap local currency for dollar-pegged tokens faces a similar question about how much monetary control stays with the domestic central bank — a concern that has accompanied dollarization debates in emerging markets for decades.

Dollar Exodus Accelerates

The central bank analyzed scenarios in which large exchanges such as Coinbase and Binance offered direct stablecoin pairs between the US dollar and local currencies. Researchers observed that funds shifted from bank balances into dollar-based stablecoins, restricting the availability of US dollars in domestic markets. In practice, such a shift would also reduce the deposit base that local banks rely on for lending, tightening domestic financial conditions through a channel outside the central bank's traditional policy toolkit.

According to the Bank of Korea, the possibility of a Federal Reserve interest rate cut could reinforce this dynamic for market participants. A weaker dollar would make switching from cash to crypto more attractive and, at the same time, could channel investment toward digital assets and blockchain projects.

The central bank's monetary policy stance has previously been followed closely, as seen in coverage such as Bank of Korea to Hold Rate as Economy Surprises.

Who Feels the Pressure from Stablecoins?

The pressure generated by stablecoins is not confined to crypto traders, the Bank of Korea notes. Local banks face potential deposit runs, regulators confront confusion caused by large capital inflows, and blockchain platforms are becoming more active through staking, NFT creation, and cross-chain transfers.

The BOK's research was flagged publicly on X:

Monetary Signal Intelligence — Material Update. Two developments meet the threshold for notification. Bank of Korea — USD stablecoins formally linked to FX transmission. On 3 September 2026, the BOK published research finding that once global intermediaries can directly trade a… — scotthardiman2019 (@scottahardiman) September 6, 2026 (https://x.com/scottahardiman/status/2096740482743492954?ref_src=twsrc%5Etfw)

These major market movements are being tracked by custodians, developers, venture companies, and issuers — including the entities behind Tether and Circle's coins.

Investors in Bitcoin and Ethereum spot ETFs could also be affected indirectly, as stablecoin liquidity can precede and even guide broader shifts toward higher-risk positioning.

Regulatory Action on the Horizon

These developments coincide with a notable rise in stablecoin circulation and shifts in major macroeconomic policy. CME FedWatch data currently assigns a higher probability to a September rate cut by the Federal Reserve, a move that could be one reason institutions grow more favorable toward stablecoins.

At the moment, the government is not expected to introduce significant measures such as reserve requirements or limits. That hands-off stance stands in contrast to jurisdictions that have moved toward explicit stablecoin frameworks — the United States and the European Union have both advanced legislation regulating stablecoin issuance and reserves — leaving open the question of whether Korean authorities will follow suit if stablecoin-driven capital flows continue to grow.

Source: Binance