IMF Vice President: Local currency stablecoins may drive users towards the digital dollar

According to Cointelegraph, Dan Katz, the First Deputy Managing Director of the International Monetary Fund (IMF), stated that local currency stablecoins, aimed at reducing dependence on dollar stablecoins, may instead make it easier for users to turn to digital dollars. Once local currency stablecoins operate on the same blockchain infrastructure as dollar stablecoins, users can easily switch between the two through decentralized exchanges, liquidity pools, or peer-to-peer exchanges.

This could accelerate the shift of foreign exchange activities from banks and currency traders to on-chain, weakening authorities' ability to monitor and manage capital flows. Katz mentioned that while it is still too early to draw conclusions, many users may prefer dollar tokens due to their strong liquidity, network effects, and ability to be used across platforms and borders. Katz pointed out that risks vary by country. In highly dollarized economies, stablecoins may primarily replace existing dollar holdings; whereas in countries where access to dollars is restricted and economic frameworks are weak, it may further increase demand for foreign currencies. Katz urged authorities to include deposit/withdrawal channels and on-chain exchange points in the regulatory framework.