Local Stablecoins Could Backfire and Boost Dollar Demand, IMF Warns

IMF says local stablecoins may lift dollar demand

On 7 August 2026, a senior International Monetary Fund (IMF) official warned that local-currency stablecoins could raise demand for dollar-backed tokens rather than reduce it. Dan Katz, the IMF's First Deputy Managing Director, delivered the remarks in a speech at the University of Cape Town. Many governments in emerging markets are weighing local stablecoins as a way to curb reliance on the dollar. Katz said such tokens may achieve the opposite result. He described a paradox in which a defence against the dollar becomes a route toward it.

"In this way, local-currency stablecoins might even accelerate the adoption of FX stablecoins", 7 August 2026. — Dan Katz, First Deputy Managing Director, International Monetary Fund

Shared blockchains let users swap local tokens for dollars

Katz said that once local and dollar stablecoins run on the same blockchain, users can convert between them with ease. That conversion can happen through decentralised exchanges, liquidity pools or peer-to-peer swaps. The shift moves foreign exchange activity away from banks and currency dealers. It reduces the friction that gives authorities the tools to monitor and manage capital flows. He framed the local token as a potential gateway rather than a barrier to the dollar.

Users favour dollar tokens for liquidity and reach

Many users may favour dollar tokens because of their liquidity, network effects and acceptance across platforms and borders, Katz said. He added that it was too early to draw firm conclusions about the trend. Katz said the outcome depends on each country's circumstances, including how far currency substitution has already spread. In highly dollarised economies, dollar tokens may largely replace existing dollar holdings. In countries where access to dollars is restricted and economic frameworks are weak, the same tokens could raise foreign-currency demand instead.

South Africa shows weak demand for rand tokens

Katz pointed to South Africa as an early example. Dollar-backed stablecoins have gained only limited traction in the country. Rand-linked tokens have attracted even less demand than the dollar versions. The example points to weaker demand for the local-currency option than for dollar tokens. Katz said the findings were preliminary.

Tether dominates the dollar stablecoin market by size

Dollar tokens also hold a clear scale advantage in the wider market. Tether (USDT), the largest dollar-pegged stablecoin, traded at $0.9993 at the time of publication. Its market value stood near $183.12 billion, the third-largest of any crypto asset (CoinPaprika, 8 August 2026). That scale reinforces the liquidity and network effects Katz described. The figure underlines how dominant dollar tokens have become.

Katz urges rules for onramps and offramps

Katz urged authorities to bring onramps, offramps and onchain exchange points within regulatory frameworks. He also said data collection should not wait for perfect regulation. He pointed to the potential role of artificial intelligence (AI) in speeding up adoption. He said authorities should act before adoption outpaces oversight.

"Data collection should not wait for perfect regulation", 7 August 2026. — Dan Katz, First Deputy Managing Director, International Monetary Fund

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