Banks Could Slow Stablecoin Growth by Raising Deposit Rates, BIS Paper Finds
A small rate hike could slow stablecoin growth
A working paper from the Bank for International Settlements (BIS) found that when U.S. bank deposit rates rise, stablecoin growth tends to slow. A single basis point increase — that is, 0.01 percentage points — was linked to a drop in ten-week stablecoin market cap growth from about 15% to about 12%.
The paper was written by researchers Rashad Ahmed and Iñaki Aldasoro. They analyzed weekly data from January 2019 through June 2025, while also accounting for Bitcoin prices, Treasury yields, and broader financial conditions.
Key numbers from the study
- A 1 basis point rise in average U.S. bank deposit rates predicted slower stablecoin growth.
- Ten-week stablecoin market cap growth fell from roughly 15% to 12% under the basic estimate.
- Under the authors' preferred estimate, which adjusts for banks raising rates in response to stablecoin growth, the effect was about three times larger, with growth slowing to roughly 6%.
- The impact was stronger for Circle's USDC than for Tether's USDT, which the authors linked to USDC's closer ties to U.S. users.
What the BIS paper says
The researchers found that banks retain some influence over stablecoin adoption through the rates they offer depositors. However, they also noted important limitations: the sample covers only one high-rate period, and the preferred estimate method had some weaknesses flagged by the authors.
The paper does not establish actual losses of bank deposits or lending. It shows a predictive relationship, not a confirmed cause-and-effect.
Why the debate matters
The findings add evidence to an ongoing debate about whether stablecoins compete with traditional bank deposits. 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 banks' lending capacity and raising borrowing costs.
A December Federal Reserve staff analysis explained that money flowing into stablecoins can return to banks as issuer deposits, which changes who supplies banks' funding even when total deposits stay the same. Larger, uninsured balances could require banks to hold more liquid assets and leave less room for long-term loans.
The Fed analysis also suggested banks could target better rates at customers most likely to switch, while keeping lower rates for less mobile depositors. Paying more to retain customers, however, raises banks' funding costs.
What remains unclear
The BIS paper's findings may change as yield-bearing stablecoins and tokenized money market funds gain ground. The study also covered only one high-rate episode, so it is not clear whether the relationship holds in different market conditions.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.