Domestic-currency stablecoins designed to reduce reliance on dollar-backed tokens may instead make it easier for users to shift into digital dollars, according to a senior International Monetary Fund official. According to Cointelegraph, IMF First Deputy Managing Director Dan Katz said on Friday that once local and dollar stablecoins operate on the same blockchain infrastructure, users can move between them through decentralized exchanges, liquidity pools or peer-to-peer swaps. In a speech at the University of Cape Town, Katz said this development could shift foreign exchange activity away from banks and currency dealers, weakening the friction that helps authorities monitor and manage capital flows. He said, "In this way, local-currency stablecoins might even accelerate the adoption of FX stablecoins." Katz pointed to South Africa, where dollar-backed stablecoins have seen limited traction, while rand-linked tokens have drawn even less demand. He said it was still too early to reach firm conclusions, but noted that many users may prefer dollar tokens because of their liquidity, network effects and broad acceptance across platforms and borders.

Katz said the impact of stablecoins differs by country. In highly dollarized economies, he said stablecoins may mainly replace existing dollar holdings, while in countries with restricted access to dollars and weak economic frameworks, they could increase demand for foreign currency. He called on authorities to integrate onramps, offramps and onchain exchange points into regulatory frameworks. The comments reflect IMF concerns that stablecoin adoption could alter how users move between local and foreign currencies, even when the goal is to support domestic money use. Katz’s remarks focused on the role of blockchain infrastructure in enabling easier conversion, and on the possibility that local-currency tokens may not reduce demand for dollar-linked assets as intended.