A stablecoin issued in a country's own currency is often pitched as a way to keep users from fleeing into dollar-backed tokens. The IMF's first deputy managing director, Dan Katz, argued the opposite may be true. Speaking on August 7 at the University of Cape Town, Katz said “local-currency stablecoins might even accelerate the adoption of FX stablecoins,” in remarks published by the IMF.
The mechanism, as Katz laid it out, is straightforward once local and dollar-denominated stablecoins sit on the same blockchain infrastructure. Users who start out holding a rand- or naira-pegged token can convert into a dollar stablecoin in seconds through a decentralized exchange, a liquidity pool, or a peer-to-peer transfer — no bank, no currency dealer, no paperwork. Rather than anchoring users to their home currency, a local stablecoin can end up functioning as an on-ramp to the dollar version.
Why Dollar Tokens Keep Winning
Katz pointed to South Africa as a live example: dollar-backed stablecoins have seen only limited adoption there, but rand-linked tokens have fared even worse. He attributed the gap to liquidity, network effects, and the fact that dollar tokens are simply accepted on more platforms across borders — the same advantages that have driven a broader wave of digital dollarization. That wave has been most visible in high-inflation economies such as Lebanon, Nigeria, Turkey, and Argentina, where dollar stablecoin use has surged over the past year even as the overall stablecoin market has held roughly flat near $300 billion in capitalization.
Uneven Risk Across Countries
The IMF's concern isn't uniform. In economies that are already heavily dollarized, stablecoins mostly just replace physical dollar holdings people already keep — a lower-stakes shift. In countries with tighter capital controls and more fragile currencies, however, easier onchain access to dollar tokens could pull foreign-exchange activity away from banks and licensed currency dealers entirely, stripping regulators of visibility into flows they currently monitor.
Related: Brazil to Delay Crypto Transfers Over $10,000 by Up to 24 Hours
The IMF's Recommendation
Rather than trying to block the shift, Katz argued authorities should build onramps, offramps, and onchain exchange points directly into their regulatory frameworks — supervising the conversion points instead of the currency choice itself. He added that countries can blunt dollarization pressure more broadly by strengthening their own macroeconomic frameworks, since demand for dollar tokens tends to track confidence in the local currency as much as it tracks blockchain convenience.
The remarks add to a growing body of IMF research this year on how stablecoins move capital across borders outside traditional payment rails, a shift the Fund has flagged as reshaping monetary oversight faster than most regulatory frameworks have adapted to.
