Local stablecoins, supposed to reduce dependence on the dollar, could instead accelerate its domination. According to the IMF, their adoption on the same blockchains as USDT/USDC facilitates the flight to the dollar. A counterproductive effect that raises questions. What if the solution became the problem?
In brief
- Local stablecoins amplify dollarization via their interoperability with USDT/USDC.
- Tether (USDT) dominates. Its liquidity and global adoption make it the undisputed king of Stablecoins, despite its risks.
- Should we regulate, adopt or resist this monetary revolution?
Local stablecoins boost dollar demand: the IMF paradox
The IMF sounds the alarm. Stablecoins indexed to local currencies, designed to limit dollarization, could then amplify it. For what ? Because, once on the same blockchain (Ethereum, Tron, etc.), users can instantly convert these stablecoins to USDT or USDC via DEXs like Uniswap. Result: instead of strengthening the naira, the cedi or the FCFA, these assets open a back door to the dollar.
Dan Katz, deputy director of the IMF, explains that in economies like South Africa, where rand stablecoins are struggling to take off, users overwhelmingly prefer dollar-backed tokens for their liquidity and global acceptance. Worse, this interoperability reduces the effectiveness of exchange controls, depriving central banks of essential levers. A shame for countries seeking to protect their monetary sovereignty. Are local stablecoins a solution… or a Trojan horse for the dollar?
Tether (USDT): the undisputed king who benefits from the paradox?
If local stablecoins are struggling to establish themselves, Tether (USDT) is happily taking advantage. With a capitalization exceeding $110 billion, USDT dominates emerging markets, where it serves as a safe haven against inflation and unstable currencies. Ironically, the more countries attempt to promote their own stablecoins, the more users turn to USDT for its unparalleled liquidity and global adoption.
In Africa, Latin America or Southeast Asia, USDT is the de facto currency for cross-border trade, often used to circumvent foreign exchange restrictions. However, its lack of transparency and its controversial links with certain malicious entities make it a risky asset. The IMF warns. If local stablecoins fail to capture demand, Tether could become the symbol of dollarization 2.0, which is even more difficult to control. A scenario that would reinforce dependence on the dollar…while eroding the authority of states.
Local stablecoins, meant to liberate emerging markets, could further chain them to the dollar. Between innovation and systemic risk, a debate is necessary: should we regulate, adopt… or resist this monetary revolution?
Maximize your Tremplin.io experience with our ‘Read to Earn’ program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.
