CoinDesk
A 1 basis point rise in average U.S. bank deposit rates was associated with slower stablecoin growth, according to a BIS working paper. The increase, equal to 0.01 percentage points, reduced average ten-week stablecoin market-cap growth from about 15% to about 12%. The effect was stronger for Circle's USDC than Tether's USDT.
Why it matters
Researchers Rashad Ahmed and Iñaki Aldasoro studied weekly data from January 2019 to June 2025 while accounting for Bitcoin prices, Treasury yields and broader financial conditions. Their findings suggest banks retain some influence over stablecoin adoption through deposit pricing. Paying savers more could make traditional deposits more competitive with stablecoins, particularly for U.S.-linked users.
The authors' preferred estimate, which adjusts for banks raising rates in response to stablecoin growth, produced a larger effect. It reduced ten-week growth to about 6%, roughly three times the baseline estimate, although the researchers flagged weaknesses in that approach. In both estimates, growth slowed but did not reverse.
Market impact
The findings add evidence to a debate over whether stablecoins could compete with bank deposits and affect banks' funding base. Bank of America CEO Brian Moynihan warned in January that as much as $6 trillion in deposits could move into stablecoins and related products offering returns, potentially reducing lending capacity and raising borrowing costs.
The paper does not establish that deposits or lending have already declined. A Federal Reserve staff analysis said issuer reserves can return to banks as deposits, changing who supplies bank funding even when total deposits remain unchanged. The BIS sample covers one high-rate episode, and the relationship could change as yield-bearing stablecoins and tokenized money market funds expand.
Frequently asked questions
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How much did a 1 basis point rate increase slow stablecoin growth?
The BIS paper found that average ten-week stablecoin market-cap growth fell from about 15% to about 12% after a 1 basis point rise in U.S. bank deposit rates.
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Which stablecoin showed the stronger relationship with bank deposit rates?
The relationship was stronger for Circle's USDC than for Tether's USDT, which the authors linked to USDC's closer ties to U.S. users.
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What did the BIS paper's preferred estimate find?
The preferred estimate reduced ten-week stablecoin growth to about 6%, roughly three times the baseline effect, although the authors identified weaknesses in that method.
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Does the study prove that stablecoins are reducing bank deposits?
No. The BIS paper does not establish that bank deposits or lending have already declined, and it covers one high-rate episode.
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Why could stablecoin reserves still matter to bank funding?
Stablecoin issuer reserves can return to banks as deposits, according to a Federal Reserve staff analysis. That can change who supplies bank funding even when total deposits remain unchanged.
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