IMF's Dan Katz Says Local-Currency Stablecoins Could Drive Users Toward Dollar Tokens

IMF First Deputy Managing Director Dan Katz said local-currency stablecoins designed to reduce reliance on dollar stablecoins could instead make users more likely to move into digital dollars. According to ChainCatcher, Katz said that if local-currency stablecoins and dollar stablecoins operate on the same blockchain infrastructure, users could easily switch between them through decentralized exchanges, liquidity pools, or peer-to-peer swaps.He said this could accelerate foreign exchange activity moving from banks and money dealers to on-chain markets, weakening authorities' ability to monitor and manage capital flows. Katz added that it is too early to draw firm conclusions, but many users may prefer dollar tokens because of their liquidity, network effects, and cross-platform, cross-border usability.Katz said the risks vary by country. In highly dollarized economies, stablecoins may mainly replace existing dollar holdings, while in countries with limited access to dollars and weaker economic frameworks, they could further increase demand for foreign currency. He called on authorities to bring on- and off-ramps, as well as on-chain exchange points, into the regulatory framework.