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Local-currency stablecoins may lift demand for dollar digital tokens, IMF says

An IMF official said linking local and dollar stablecoins on the same blockchain could make conversions easier via decentralized exchanges, liquidity pools, or peer to peer swaps.

Reported · Written up by our desk · Stablecoins

Cointelegraph reports that International Monetary Fund first deputy managing director Dan Katz warned that domestic-currency stablecoins aimed at reducing reliance on dollar-backed tokens could instead increase users moving into digital dollars. In remarks at the University of Cape Town, Katz said once local and dollar stablecoins run on the same blockchain infrastructure, users could convert between them through decentralized exchanges, liquidity pools, or peer-to-peer swaps. He also said the shift could move foreign exchange activity away from banks and currency dealers, potentially reducing the friction that helps authorities monitor and manage capital flows.

Katz said local and dollar stablecoin alignment could even accelerate the adoption of FX stablecoins. He pointed to South Africa, where dollar-backed stablecoins have seen limited traction while rand-linked tokens have attracted even less demand, though he cautioned that it is too early for firm conclusions.

According to Cointelegraph, Katz said stablecoin risks vary by country, noting that stablecoins might replace existing dollar holdings in highly dollarized economies but could raise demand for foreign currencies where access to dollars is restricted and economic frameworks are weak. He urged regulators to build regulated onramps, offramps, and onchain exchange points.

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