IMF: Domestic Stablecoins Could Boost Demand for USD Stablecoins

August 8th – Dan Katz, First Deputy Managing Director of the International Monetary Fund (IMF), stated that local stablecoins designed to reduce reliance on the US dollar stablecoin may instead accelerate user adoption of US dollar stablecoins.

Katz pointed out that when local stablecoins and US dollar stablecoins operate on the same blockchain infrastructure, users can exchange between the two through decentralized exchanges, liquidity pools, or peer-to-peer transactions, potentially reducing the cost of fund conversion and driving foreign exchange activity from traditional banks and money changers to on-chain.

He stated: "Local stablecoins may even accelerate the adoption of foreign exchange stablecoins (US dollar stablecoins)." Using South Africa as an example, Katz noted that although the US dollar stablecoin already has some usage locally, the demand for local stablecoins pegged to the Rand is lower. While no definitive conclusion can currently be drawn, users may be more inclined towards US dollar stablecoins due to higher liquidity, stronger network effects, and broader platform and cross-border acceptance.

Katz believes that the impact of stablecoins varies depending on the country's situation. In highly dollarized economies, stablecoins may mainly substitute existing dollar assets; whereas in countries with restricted access to dollars and weaker economic fundamentals, stablecoins may further increase foreign currency demand. He called on regulatory authorities worldwide to include stablecoin onramps, offramps, and on-chain trading platforms in their regulatory frameworks to mitigate potential risks.