Dan Katz, First Deputy Managing Director of the International Monetary Fund (IMF), said that domestic stablecoins created to reduce reliance on dollar-pegged stablecoins may instead make it easier for users to turn to digital dollars, according to Cointelegraph.
Once local-currency stablecoins and dollar stablecoins run on the same blockchain infrastructure, users can easily switch between the two through decentralized exchanges, liquidity pools, or peer-to-peer conversions, Katz explained. That could accelerate the migration of foreign exchange activity away from banks and currency dealers onto the chain, weakening the authorities' ability to monitor and manage capital flows.
Although it is still too early to draw firm conclusions, many users may ultimately prefer dollar-denominated tokens because of their deep liquidity, network effects, and usability across platforms and borders, Katz said.
He also stressed that risks vary by country. In highly dollarized economies, stablecoins might primarily replace existing dollar holdings. In nations where dollar access is restricted and economic frameworks are weak, they could amplify demand for foreign currency. Katz called on authorities to bring fiat on-ramps, off-ramps, and on-chain exchange points within the regulatory perimeter.