Domestic stablecoins could boost demand for dollar-backed tokens: IMF

IMF first deputy managing director Dan Katz says users may favor digital dollars for their liquidity, network effects and cross-border acceptance.

Domestic-currency stablecoins intended to curb reliance on dollar-backed tokens could instead make it easier for users to move funds into digital dollars, according to a senior International Monetary Fund (IMF) official.

On Friday, IMF First Deputy Managing Director Dan Katz said that once local and dollar stablecoins operate on the same blockchain infrastructure, users can convert between them through decentralized exchanges, liquidity pools or peer-to-peer swaps. 

In a speech at the University of Cape Town, Katz said the shift could move foreign exchange activity away from banks and currency dealers, reducing the friction that gives authorities tools to monitor and manage capital flows. 

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