A quick tour from coins to exchanges—
then into the structure that keeps the price pinned to $1.
Before talking about stablecoins, we need to start one step earlier. Stablecoins were born inside the crypto market, and they were created because of the way that market works.
A bank-account balance is a number recorded in a ledger run by the bank. With a coin, that ledger is not held by one company; everyone participating shares a copy. The shared ledger records who sent how much to whom, and changing that record requires moving a majority of the network. There is no central administrator, but transactions are correspondingly hard to reverse.
Bitcoin was the first. Its design paper was released in October 2008, and the first record was created on January 3, 2009. Since then, coins built for many different purposes have continued to appear.
Ripple is the name of the company behind XRP. In Korea, the company and token names were long used interchangeably; in February 2025, Upbit changed the listed asset name from “Ripple” to “XRP.”
This is the starting point for this episode. A stock has a company behind it, and a bond has an obligation to repay. A coin has no such claim behind it. Its price is made by buyers and sellers.
That is why prices can move so sharply. In a March 2026 report, the Bank for International Settlements wrote that Bitcoin had fallen about 50% from its 2025 peak. The Bank of Korea cited the sharp drop that followed Bitcoin’s record high on October 10, 2025, when large-scale futures liquidations accelerated the move.
Bitcoin alone accounts for more than half. Thousands of other assets split the rest, based on IMF data.
Coins are bought on exchanges. But the way in differs between Korea and overseas markets.
In August 2021, Binance removed all Korean-won trading pairs and KRW payment options, saying it was acting proactively to comply with Korean regulation. Since then, direct KRW access to major overseas exchanges has effectively been closed.
So what do overseas exchanges use as the unit of account? If volatile coins are priced against other volatile coins, the benchmark itself moves. A coin whose price does not move is what the market needed here.
That last point is the starting point. In a market where prices can move dramatically within a day, traders needed somewhere to park value temporarily. As of June 2025, 85% of global cryptoasset trading was settled in stablecoins.
Bitcoin’s design paper does not contain the number 21 million. It only says that once a predetermined number of coins have entered circulation, incentives transition to transaction fees.
The cap comes from the issuance rules in the code. The block reward began at 50 BTC and halves every 210,000 blocks; the resulting series converges on 21 million. The most recent halving was on April 20, 2024, and the current block reward is 3.125 BTC.
The term altcoin has no official definition. Neither international bodies nor regulators have formally defined the term. It is simply a market shorthand.
Meme coins are different. On February 27, 2025, the U.S. SEC’s Division of Corporation Finance issued a staff statement defining meme coins as coins that arise from internet memes or popular topics and attract online users, and said they are not securities. But the statement is not a rule and has no binding legal force.
The XRP lawsuit did not ask whether XRP itself was a security in the abstract. The July 2023 ruling distinguished between direct institutional sales, which were investment contracts, and sales through exchange order books, which were not, because buyers did not know who was on the other side. The key question was how the asset was sold and to whom. The appeal was withdrawn on August 7, 2025, ending the case.
StablecoinA digital asset designed to keep its value tied to a reference asset such as the U.S. dollar. The issuer sets aside reserve assets to support that value. is designed to stay pegged to $1. But on March 11, 2023, the exchange price of USDC, a major dollar stablecoin, fell as low as $0.88.
Sources differ on the low: some report $0.86 and others $0.88. The Federal Reserve cites $0.86, while other Fed-system research and the Bank of Korea cite $0.88.
Circle, the issuer of USDC, had placed $3.3 billion of its reserve assetsAssets the issuer sets aside against the coins it has issued. They can include cash, bank deposits, and government securities. at Silicon Valley Bank. The bank was closed on March 10. The amount at risk was 8% of total reserves, while incoming redemptionReturning coins to the issuer and receiving cash at par. requests reached $7.8 billion, equal to 18% of market capitalization.
KRW 1 million deposited at KB Kookmin Bank and KRW 1 million deposited at Shinhan Bank are always worth the same KRW 1 million. That is because both banks hold reserves at the central bank and settle with one another through the central-bank payment system. The Bank of Korea calls this the singleness of money.
Stablecoins do not have that central settlement mechanism. Each issuer has a different reserve mix and a different credit profile. The Bank of Korea put it this way: Even the two largest stablecoins, USDT and USDC, do not always exchange one-for-one. In other words, before asking whether one coin equals one dollar, even the question of whether one “dollar coin” equals another is unsettled.
Nor is this the first time money bearing the same face value has traded differently. In the mid-19th century, the United States adopted free banking. Anyone who met a state’s requirements could establish a bank and issue banknotes.
The result was disorder. The quality of the state bonds backing each bank differed, so notes carrying the same $1 face value traded at different prices. Merchants checked which bank had issued a note before accepting it. Some $1 notes traded at $0.90, others at $0.80, and some Indiana free-bank notes fell as low as $0.20.
State issuance does not guarantee the face value either. Under King Gojong of Joseon, the Dangbaekjeon was assigned a face value 100 times that of an ordinary coin, as its name implied, even though its copper content was barely higher. People quickly recognized the mismatch, and prices surged.
Pay $1 and receive one coin; return one coin and receive $1. That is the basic promise. But access to that desk is restricted.
This three-floor building returns on Page 4, where we mark the floor that failed in each case.
Tether figures are based on disclosure documents filed with El Salvador’s regulator. Circle’s institutional-account documentation explicitly states that the service is not offered to individuals.
The Bank of Korea makes the same point. Individuals and ordinary corporations cannot demand direct redemption from the issuer; they must sell on an exchange to cash out. The Bank of Korea calls this market redemption. In other words, the $1 price we see on the screen is not the issuer-desk price; it is a market price formed on the third floor.
“A small set of participants are eligible to issue and redeem directly with the issuer at par. They operate between the primary market and the secondary marketA market where users trade with one another without going through the issuer. The exchange screen is the secondary market. , using arbitrageTrading the price difference between the same asset in two venues to earn a profit. to keep the price near par.”
The IMF compares this structure to an ETF’s authorized participants. What holds the peg is not an issuer’s declaration, but the incentive for people with access to that door to act.
Both issuers say they are backed “1:1,” but what fills the reserve pool is different. One includes gold, Bitcoin, and secured loans; the other is composed of Treasuries and cash.
A Federal Reserve note published in April 2026 gives a useful comparison:
Same company, same point in time—yet the ratios differ this much because what counts toward the “1” is different. Total assets include gold, Bitcoin, and secured loans; the narrower high-quality-asset measure does not.
What Holds the Peg Is Not the Promise but
the Incentive for Those With Access to the Door to Act.
The two cases in which the peg broke failed in different places. Put them into the three-floor building from Page 3 and the fault becomes visible.
USDC had reserve assets in March 2023. But when the banking system closed for the weekend, the first-floor issuer desk stopped operating, so the second-floor arbitrageurs could not do their job. We can now answer the question from Page 2. The government announcement on Sunday drove a large rebound, and when the issuer desk reopened on Monday, USDC returned fully to $1. The Federal Reserve describes the sequence in that order. The announcement sparked the recovery; the reopened redemption channel completed it.
TerraUSD in May 2022 held neither dollars nor Treasuries in reserve. When its price fell, it promised holders $1 worth of another token from the same ecosystem, Luna. That conversion promise stood in for reserve assets.
The more TerraUSD was converted, the more Luna was minted; the lower Luna’s price fell, the less value each new token could provide. In one week, Luna’s supply exploded from the hundreds of millions into the trillions.
“The key reason for Terra’s collapse was that it promised to maintain a value of $1 without putting in place adequate and effective stabilization mechanisms to support that promise.”
The U.S. Department of Justice put investor losses at more than $40 billion. Side by side, the contrast is clear: in one case the backing existed but the door closed; in the other, the door could open but there was nothing adequate behind it.
So far, this has been a dollar story. Korea places the gateway somewhere else. To buy crypto with Korean won on a domestic exchange, you need a real-name verified deposit/withdrawal accountAn account structure that allows funds to move only between the exchange’s account and the customer’s account at the same bank. It is based on Article 7 of Korea’s Act on Reporting and Using Specified Financial Transaction Information.. This requirement is based on Article 7(3)2 of the Act on Reporting and Using Specified Financial Transaction Information and took effect on March 25, 2021. The account allows money to move only between the exchange’s account and the customer’s account at the same bank . If an exchange cannot secure a partnership with a bank, it cannot open a KRW marketA market where crypto can be bought and sold directly for Korean won. A real-name verified deposit/withdrawal account is required. at all. As of July 2026, five exchanges operated such markets.
Upbit · K Bank · Bithumb · KB Kookmin Bank · Coinone · KakaoBank · Korbit · Shinhan Bank · Gopax · Jeonbuk Bank
The numbers reveal how different this structure is. The following figures are Bank of Korea data as of end-June 2025.
Korean users generally do not need a dollar stablecoin as a bridge asset. They buy directly with won because the banking gateway is attached to the exchange.
Holdings on Korean exchanges are also relatively small. At end-June 2025, they held KRW 557.1 billion of USDT and KRW 20.7 billion of USDC, roughly 0.1% of global market capitalization. In Korea, these coins are used primarily as a transfer rail between domestic and overseas exchanges.
The Bank of Korea assessed that dollar stablecoins are unlikely to broadly displace demand for the won in Korea. Dollarization tends to emerge primarily in countries with high inflation, such as Argentina, Nigeria, and Türkiye.
Balances remaining on Korean exchanges are small, but outbound flows are not. According to data the Financial Supervisory Service submitted to the National Assembly, net outflows from Korea’s five exchanges in June 2026 were KRW 560.3bn, and cumulative net outflows from January 2025 through June 2026 were KRW 14.9246tn. That marked 18 consecutive months of net outflows.
According to Bank of Korea data submitted to the National Assembly, stablecoin holdings on Korean exchanges at end-February 2026 were KRW 607.1bn.
The last point matters. A disclosure tells you what the issuer holds. It does not tell you what those assets will fetch in a rush.
Total market size. A primary source for total market capitalization as of August 2026 was not found. The latest figure we could verify is about $320 billion at end-May 2026, from the BIS.
Market share. Neither issuer specified a common denominator. Circle cited 27% and Tether more than 60%, but the underlying denominators differ, so we use dollar amounts instead. At end-June 2026: Tether $183.6 billion; Circle $73.3 billion.
USDC low. Even Federal Reserve publications differ between $0.86 and $0.88. Rather than force a single figure, we present the range and identify the sources.
The $450 billion “Terra loss” figure. That figure refers to the decline in the broader cryptoasset market during May–June 2022, not losses from Terra alone. Because the figures are often conflated in reporting, this article uses only the U.S. Department of Justice figure of more than $40 billion in investor losses.
Special Research No. 03 · Behind the Coin Are Treasuries
This article is educational material explaining economic and financial terminology and how to read market structures. It is not a recommendation to buy or sell any specific asset. Investment decisions and their outcomes remain the investor’s responsibility.
Figures are based on issuer disclosures, reports by international organizations and central banks, and reporting that cites materials submitted to Korea’s National Assembly. Reference dates are stated in the text.
The Language of Markets · 06