Efforts by emerging markets to develop local-currency stablecoins could inadvertently increase demand for U.S. dollar-backed tokens, the IMF said, as users may favor dollar stablecoins because of their deeper liquidity, stronger network effects and wider acceptance.
The issue is particularly relevant in emerging markets where stablecoins can provide easier access to foreign currency while also weakening traditional controls over capital flows and increasing dollarization.
South Africa offers an early case study.
Stablecoins: Promise, Risks, and Policy Choices for Emerging Markets – IMF Deputy Managing Director
Dollar-based stablecoins have so far gained limited traction, but Rand-linked stablecoins have attracted even less demand, IMF First Deputy Managing Director, Dan Katz, said in remarks at the University of Cape Town.
The divergence suggests that simply creating a Rand stablecoin may not be enough to shift users away from dollar tokens.
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Once local- and dollar-denominated stablecoins operate on the same blockchain infrastructure, users can potentially convert between them directly through
decentralized exchanges,
liquidity pools, or
peer-to-peer markets,
reducing reliance on banks and traditional foreign-exchange intermediaries.
That could make the local stablecoin an on-ramp to dollarization rather than a barrier to it.
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The IMF estimates that nearly 99% of stablecoins are denominated in U.S. dollars. Stablecoin market capitalization has remained around $300 billion over the past year while payment-related stablecoin flows reached an estimated $390 billion in 2025.
For South Africa, the IMF says the experience also highlights a broader regulatory challenge.
The South African Reserve Bank has used data from major crypto exchanges to gain insight into the market finding household holdings to be predominant, but the exercise also exposed significant gaps outside the regulatory perimeter.
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The IMF says policymakers should therefore focus less on simply creating domestic stablecoins and more on strengthening macro-economic fundamentals, improving data collection, and bringing exchanges, custodians, and on- and off-ramp providers into the regulatory framework.
The bigger implication is that stablecoin competition may increasingly be a competition over currency networks, not just payment technology. A local stablecoin with weaker liquidity and fewer use cases could end up making the dollar stablecoin next to it easier to access.
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Stay tuned to BitKE on stablecoin developments across Africa.
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