South Korean exchanges have stepped up efforts in the market centered around United States dollar-pegged stablecoins. According to industry officials, stablecoins have seen a rise in demand across the Korean crypto market amid a rise in the won-dollar exchange rate due to volatility.
While the benchmark KOSPI and other commodities like gold and silver have risen to new levels, digital assets have always been left out of previous rallies, which usually leaves South Korean exchanges struggling.
However, things have changed this time, with the rise in the value of the US dollar boosting the demand for stablecoins. This has prompted exchanges to capitalize on the trend and increase trading volumes.
South Korean exchanges turn to stablecoins to boost volumes
The trend began with Korbit announcing its plan to waive all trading fees for transactions involving dollar-pegged stablecoin USD Coin (USDC) last week. The stablecoin was developed by Circle, and each token is designed to maintain the value of a dollar.
In addition, Korbit also announced a USDC trading campaign that remains ongoing. The campaign is expected to run through March, warning users that they will record at least 10 million won ($6,900) in weekly cumulative transaction volume.
The exchange mentioned that traders who hit this threshold would be eligible to share a reward pool totaling 25,000 USDC, with allocations varying based on the trading volume of the participant for that week.
Coinone is also running a similar campaign, announcing that it will distribute 8,000 USDC to its users every week if they reach a certain trading volume by the end of that week.
Meanwhile, Upbit and Bithumb are taking a different approach. The exchanges, considered the two biggest in the Korean crypto industry, are listing new stablecoins.
Some weeks ago, both exchanges announced the listing of Ethena USD (USDe), a synthetic stablecoin developed by Ethena Labs. The token is designed to maintain a one-on-one value with the US dollar without relying on traditional bank reserves.
The two firms have also launched other campaigns aimed at increasing their transaction volumes. Upbit recently announced a three-round promotion campaign that started on January 17, offering free Ethena tokens to its users who rank among the top traders of USDe.
The intensifying marketing push around dollar-pegged stablecoins has been driven largely by the sharp drop in the won-dollar exchange rate. As the exchange rate continues to move higher, trading activity using dollar-based stablecoins has increased drastically.
Exchange rate skyrockets amid moves to regulate stablecoins
Data from on-chain analysis firm CryptoQuant shows that when the exchange rate exceeded 1,480 won per dollar last Wednesday, trading volume in Tether across the major exchanges trading in won hit 378.2 billion won, marking a 62% rise from January 1.
According to an official from one of the top exchanges, exchanges are stepping up their activities due to the rising exchange rate. In the current market environment, stablecoins are used to boost trading volumes and develop new revenue streams.
Meanwhile, Korea recently made its first legislative step to curb money laundering via stablecoins. The country announced that stablecoins would be brought under the Foreign Exchange Transactions Act as part of efforts to combat money laundering and tax evasion using digital assets.
The bill was proposed by Rep. Park Sung-hoon, and classified stablecoin as a legal means of payment, placing them alongside existing instruments like government-issued notes and banknotes.
“This regulatory gap could enable illegal foreign exchange dealings and tax evasion using stablecoins,” the lawmaker said. “The bill aims to classify virtual assets pegged to domestic or foreign currencies, which can be used for payments for a broad range of users, as official means of payment under the law.”
The concerns mirrored those of the Bank of Korea, which warned that stablecoins could be used for cross-border transactions without complying with reporting requirements.
