IMF's Dan Katz says domestic stablecoins may drive users toward dollar-pegged tokens, citing liquidity and cross-border acceptance as key draws.
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The International Monetary Fund’s first deputy managing director, Dan Katz, warned that locally issued stablecoins may end up funneling more capital toward dollar-backed tokens, complicating monetary policy in emerging markets.
Speaking at the University of Cape Town on August 7, Katz laid out a paradox. Countries launching domestic stablecoins might inadvertently drive users toward the very dollar-pegged tokens they aimed to compete with, he said. Users gravitate toward dollar-backed stablecoins because of superior liquidity and seamless cross-border acceptance. The network effects are strong enough that local alternatives struggle to match them, Katz argued.
The logic, Katz explained, runs through cross-border commerce. A domestic stablecoin pegged to a local currency still needs to interact with global markets. The moment it touches trade or remittances, users discover that dollar-backed tokens settle faster, trade in deeper pools, and are accepted by more counterparties worldwide. So even a well-designed local stablecoin becomes an on-ramp to dollar-denominated assets rather than a substitute for them.
Katz did not frame this as entirely negative. He acknowledged the benefits of dollar-backed tokens for remittances and trade settlement in regions where local banking infrastructure is unreliable.
The IMF’s concerns build on earlier warnings. At the World Economic Forum in Davos in January 2026, panelists said the rise of dollar-backed tokens could pressure local monetary frameworks and trigger deposit shifts in emerging markets. When citizens can hold a stable, dollar-pegged asset on their phones, the incentive to keep savings in a depreciating local currency weakens, they argued.
Katz has been developing this theme since taking the first deputy managing director role in October 2025. At an Atlantic Council event on June 17, he discussed how asset tokenization and cross-border payments are converging in ways that traditional financial infrastructure struggles to match.
The IMF’s internal policy debates now center on whether its existing frameworks, designed for a world of sovereign currencies and correspondent banking, are adequate for programmable money that moves at the speed of the internet, Katz said.
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