IMF Warns Local Stablecoins May Boost Dollar-Backed Token Demand
International Monetary Fund (IMF) First Deputy Managing Director Dan Katz warned that local stablecoins may inadvertently facilitate conversion into dollar-backed tokens, potentially increasing demand for FX stablecoins. This is because local and dollar-denominated stablecoins can operate on the same blockchain infrastructure, allowing users to exchange between them through decentralized exchanges, liquidity pools, or peer-to-peer swaps.
Katz noted that if local-currency stablecoins are deployed on the same blockchain as dollar-backed tokens, conversion between the two could become routine. This could shift foreign-exchange activity away from traditional intermediaries such as banks and currency dealers.
The IMF official highlighted that outcomes will differ by country, depending on factors like dollarization levels, market access, and economic institutions. He urged regulators to ensure onramps, offramps, and onchain exchange points are integrated within regulatory frameworks.