just curious what would be the difference between using vol swaps vs var swap for this problem ?

Yes agree. Suppose if the traders do not want to buy vol swaps (lower liquidity), how can a vol swap be replicated using vanilla options in general ? Thanks. 

Digital call option on FX and the KO at expiration is dependent on the realized vol of the same FX pair. I think on the sell side, traders will hedge with risk with vanilla options and forwards.

 Hi, could someone tell me how do people hedge realized vol knock out ?
For example this could be a European digital call where the option could knock out at expiration if the realized vol is above the barrier. Thanks.