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FollowingFirst Deputy Managing Director of the IMF: Domestic stablecoins may boost the use of digital dollars, calling for strengthened supervision
First Deputy Managing Director of the International Monetary Fund (IMF) Dan Katz recently said that some policy makers hope that domestic currency stablecoins can reduce reliance on dollar-linked digital tokens, but the actual situation may be the opposite-such stablecoins may instead make it easier for users to obtain and hold digital dollars.
stablecoins and cross-border effects
In a recent speech at the University of Cape Town, Katz elaborated on the evolving role of stablecoins in the global financial system. He pointed out that domestic stablecoins and dollar-linked stablecoins can operate on the same blockchain infrastructure, and users can freely switch between the two through decentralized exchanges, liquidity pools or peer-to-peer transactions.
Katz highlighted one possible outcome: a shift in foreign exchange trading activity away from banks and traditional currency dealers. He noted that while this process would reduce trading frictions, it would also weaken regulators 'ability to observe and control capital flows.
Katz said that although the original intention of introducing domestic stablecoins was to reduce dependence on the US dollar, these changes may actually accelerate the popularity of dollar-linked stablecoins.
Taking South Africa as an example, Katz observed that in the market, dollar-linked stablecoins attract more attention than digital tokens linked to the South African rand. He warned that it was too early to draw conclusions, but preliminary trends showed that many users preferred digital dollars because of their higher liquidity, stronger network effects, and wider acceptance across different platforms and countries.
Dictionary: A stablecoin is a digital asset designed to maintain value stability by pegging it to a reserve asset (usually a legal tender, such as a domestic currency such as the US dollar or rand). Such tokens enable fast digital transactions and avoid common price fluctuations in traditional cryptocurrencies.
Regulatory risks and country risks
Katz pointed out that the popularity of stablecoins may bring potential risks, which vary depending on the specific circumstances of each country.
In countries that are already highly dollarized, new stablecoins may simply replace existing physical or digital dollar holdings with a tokenized form. However, in economies with limited access to U.S. dollars and fragile macroeconomic policy frameworks, stablecoins may increase demand for foreign currencies, putting greater pressure on the local economy.
Katz urged authorities in various countries to adjust regulatory approaches based on these changes. He suggested establishing a regulatory framework for digital asset deposits, withdrawals and on-chain exchange points to better manage capital flows and potential loopholes in the digital asset ecosystem. He emphasized that all on-chain nodes where users enter, exit and trade stablecoins must be brought into the scope of supervision.
As an international financial institution that provides monetary cooperation and stability advice to member states, the IMF is continuing to pay attention to the impact of these emerging currency forms on global capital controls, monetary policy and financial stability.
