Key Takeaways:
Countries building domestic stablecoins may be doing the dollar a favor, not themselves, the IMF's First Deputy Managing Director warned, as shared blockchain rails make conversion to dollar-backed tokens easy.
"Domestic stablecoins and dollar-backed tokens running on the same blockchain infrastructure let users move between them fast, through decentralized exchanges, liquidity pools, or basic peer-to-peer swaps," Dan Katz, First Deputy Managing Director at the International Monetary Fund, said at the University of Cape Town. "When that conversion is smooth, the question becomes why hold the local token at all."
Katz pointed to South Africa as a live example. Dollar-backed stablecoins there have seen limited uptake, but rand-linked tokens are doing even worse, a gap that suggests users are actively less interested in local-currency alternatives than in the foreign option. If that preference holds in a relatively developed emerging market with a functioning currency and deep financial infrastructure, the dynamic in weaker economies could be far more pronounced.
The warning lands as tokenized finance expands. RWA deposits across lending platforms and exchanges reached $7.4 billion in Q2 2026, more than triple their year-earlier level, while distributed tokenized funds, stocks and commodities surpassed $40 billion by Q1 2026, according to CoinShares and Token Terminal data. The IMF's July 2026 report divides tokenized finance into infrastructure, assets and services.
Katz's concern is not just user preference but what happens to the plumbing of foreign exchange markets when stablecoin swaps start replacing traditional currency dealers and bank-intermediated FX transactions. Capital flows that once moved through regulated, visible channels could shift onto decentralized platforms where oversight is harder and intervention is nearly impossible in real time. For regulators managing exchange rate stability or enforcing capital controls, that is a serious headache.
The IMF's position is that regulating whether a stablecoin can be issued is not enough. Authorities need to bring the onramps, the offramps, and the onchain exchange points where conversions actually happen inside existing regulatory frameworks. If capital can flow freely between a rand stablecoin and a dollar stablecoin on a decentralized exchange with no regulatory visibility, any rules applied only to the rand token's issuance are incomplete.
Katz was careful to say the impact varies by country. In economies already heavily dollarized, where businesses price in dollars and households save in dollars, a shift toward dollar stablecoins may not dramatically change the underlying financial reality. The dollar is already dominant; stablecoins might just be a new wrapper for existing behavior.
But in countries with restricted dollar access and weak economic frameworks, the story is different. Local-currency stablecoins that make dollar conversion easy could actively accelerate demand for foreign currency. People who could not easily get dollar exposure before now can, with a few taps on a phone. That is a real pressure on local monetary systems, and it can compound fast if not anticipated.
Katz also raised network effects explicitly. Dollar stablecoins have them; local-currency alternatives do not, at least not yet. Users who need cross-border functionality will gravitate toward the option that works everywhere, and that is not the rand token or the peso token. Building a domestic stablecoin without accounting for that competitive reality is, per Katz, a mistake countries cannot afford.
The IMF is not calling for a ban on stablecoins or on shared blockchain infrastructure. The call is for regulatory frameworks sophisticated enough to match the actual architecture of how these assets work, not just what gets issued, but how it moves, where it converts, and who can see it when it does. For emerging-market central banks weighing domestic stablecoin programs, the takeaway is that the infrastructure itself carries the risk, and the regulatory response must match it.
This article is for informational purposes only and does not constitute investment advice.
