Surge in Stablecoin Trading in Korea Amid Dollar Strengthening

South Korean cryptocurrency exchanges are experiencing a significant rise in stablecoin trading volumes, driven by the South Korean won’s downturn against the U.S. dollar. As a result, platforms are enhancing promotional activities for dollar-pegged tokens like Tether (USDT).

Key Takeaways

Stablecoin Trading Increase: Trading volumes for stablecoins have surged by 62% in South Korea.
Economic Factors: The won has seen a decline, prompting aggressive marketing from exchanges.
Government Intervention: Banks have been directed by the government to reduce dollar deposit rates.
Presidential Influence: President Lee Jae-myung’s comments on the won's exchange rate added significant market impact.
Shifting Economic Landscape: Despite a slowdown in GDP growth, South Korea is reforming its cryptocurrency policies.

Stablecoin Trading Surges 62% in Korea as Dollar Strengthens Against Won

Main Content

South Korean cryptocurrency exchanges have reported a remarkable 62% increase in stablecoin trading volumes due to the won depreciating against the dollar. This downturn has encouraged various platforms to ramp up marketing efforts for dollar-pegged cryptocurrencies.

As reported by The Korea Times, trading volume for Tether (USDT) across the five major won-based exchanges in South Korea rose to 378.2 billion won ($261 million), especially when the exchange rate surpassed 1,480 won per dollar last Wednesday, according to data from CryptoQuant.

This trading surge aligns with increasing pressures on the won, which has experienced nine days of continuous declines against the dollar, marking its longest losing streak since 2008, as detailed by Bloomberg.

Stablecoin Korea Dollar WON/USD Chart Bloomberg

To respond to this trend, major exchanges such as Korbit, Coinone, Upbit, and Bithumb implemented robust promotional campaigns focused on stablecoins like USDC and USDe. These actions included waiving trading fees and offering incentives to boost trading volume during a period that has been described as a downturn in the broader cryptocurrency market.

Government Actions on Dollar Rates

In response to currency devaluation, South Korea’s principal commercial banks have drastically lowered interest rates on dollar deposits. According to The Chosun Daily, Shinhan Bank cut its annual rate from 1.5% to 0.1% starting January 30, and Hana Bank reduced its rates from 2% to just 0.05% for its Travelog Foreign Currency Account.

This coordinated move came after government authorities summoned bank executives, urging them to "refrain from excessive marketing that promotes foreign currency deposits like dollars."

Banks have since introduced incentives for converting dollars to won, with Shinhan offering a 90% preferential exchange rate for customers exchanging dollar deposits back to won, plus an additional rate boost for those who opt for won-term deposits afterward.

As of January 22, dollar deposit balances in the top five banks fell by 3.8% to 63.25 billion dollars, marking the first decline after three months of increases. Corporate dollar deposits, which make up 80% of total dollar holdings, dropped significantly from 52.42 billion dollars at the end of the previous year to 49.83 billion dollars, indicating that the government's advice to sell dollars, combined with the belief that the exchange rate had peaked, is influencing these trends.

On the other hand, individual dollar deposits increased at a much slower rate, climbing by just 109.64 million dollars, contrasting sharply with a 1.09 billion dollar increase the previous month.

Presidential Comments and Market Impact

President Lee Jae-myung made notable remarks about the exchange rate at a press conference on January 21, stating he expected the won to stabilize around 1,400 won to the dollar within one to two months. Following his comments, the won-dollar exchange rate promptly dropped from 1,481.4 won to 1,467.7 won, eventually settling at 1,471.3 won.

Stablecoin Korea Dollar

Market analysts observed the unusual nature of a sitting president outlining a specific exchange rate target and timeline, giving his statement more weight than previous comments from U.S. Treasury Secretary Scott Bessent, who noted the recent decline in the won was “inconsistent with Korea’s strong fundamentals.”

Demand for dollar exchanges slowed down, with average daily won-to-dollar transactions at 16.54 million dollars from January 1 to 22. In contrast, dollar-to-won conversions surged to 5.2 million dollars daily, significantly outpacing last year’s average of 3.78 million dollars, suggesting a trend toward profit-taking.

According to CNBC, South Korea's GDP growth for the fourth quarter slowed to 1.5% year over year, below economists’ expectations of 1.9%. This slowdown was attributed to a 3.9% drop in construction investment and a 2.1% decline in exports from the previous quarter.

This year, the won has depreciated by nearly 2% against the U.S. dollar, making it one of Asia's underperforming currencies, while South Korean retail investors purchased around 2.4 billion dollars worth of U.S. stocks on a net basis by mid-January, an increase of about 60% compared to the same time last year.

As South Korea experiences economic challenges, it is simultaneously advancing significant reforms in cryptocurrency policies. Earlier this month, the country lifted its nine-year ban on corporate crypto trading, allowing listed companies to invest up to 5% of their equity capital into top-20 cryptocurrencies. Lawmakers also passed amendments to the Capital Markets Act and the Electronic Securities Act, establishing a regulatory framework for tokenized securities trading set to start in January 2027.

Korea Exchange Chairman Jeong Eun-bo announced plans to introduce spot Bitcoin ETFs and extend trading hours to 24/7 in an effort to eliminate the so-called “Korea discount,” although comprehensive legislation for digital assets remains stalled due to ongoing disagreements between the Financial Services Commission and the Bank of Korea regarding stablecoin issuance regulations.