BIS paper: higher US bank deposit rates slow stablecoin growth

Key points

• BIS paper: 1 bp rise in US deposit rates cut ten-week stablecoin growth from ~15% to ~12%
• Authors' preferred estimate shows a larger effect, to about 6%, with caveats
• Effect stronger for USDC than USDT, tied to US user base
• Paper does not show banks lost deposits; sample covers one high-rate cycle

A working paper from the Bank for International Settlements (BIS) finds that higher U.S. bank deposit rates are associated with slower growth in the stablecoin market, suggesting banks have some say over how fast dollar tokens gain users. According to CoinDesk, a 1 basis point rise in average deposit rates cut average ten-week stablecoin market capitalization growth from about 15% to about 12% in the paper’s baseline model.

The paper, Working Paper No. 1382, is titled “Are Stablecoins and Bank Deposits Substitutes?” and was written by Rashad Ahmed and Iñaki Aldasoro. It uses weekly U.S. data from January 2019 to June 2025.

What the paper found

The authors found that increases in deposit rates predicted slower growth in stablecoin market capitalization. Their preferred estimate, which adjusts for banks raising rates in response to stablecoin growth, showed an effect roughly three times larger, with ten-week growth slowing to about 6%, CoinDesk reported. The authors flagged weaknesses in that method. In both cases growth slowed but did not reverse.

According to Coin Edition, the effect appears once the federal funds rate rises above roughly 3%, when banks begin raising deposit rates more quickly. Non-stablecoin crypto assets showed no matching response, and yields on DeFi platforms such as Aave and Compound did not prevent balances from falling when bank rates rose.

USDC reacts more than USDT

The effect was stronger for Circle’s USDC than for Tether’s USDT. The authors linked this to USDC’s closer ties to U.S. users. Coin Edition reported that ten weeks after a 1 basis point deposit-rate rise, USDC growth was 4.8 percentage points lower and USDT growth 1.9 points lower. Outside DeFi lending pools, USDC balances fell 5.5%, while the USDT decline of 0.8% was not statistically significant.

The authors wrote that banks “retain some influence over the pace of that adoption through deposit pricing,” according to CoinDesk.

Limits and the wider bank debate

The paper does not establish that banks lost deposits or lending. Its sample covers a single high-rate cycle, and Coin Edition said a key statistical test scored 9.78, just under the conventional threshold of 10. Adding a time trend cut the main estimate from about 9% to 4%, according to the same report. The authors also said they cannot identify which banks or depositors are affected, and that interest-paying stablecoins could change the relationship over time.

The findings arrive amid a debate over how much money could leave banks. CoinDesk noted that Bank of America CEO Brian Moynihan warned in January that as much as $6 trillion in deposits could move into stablecoins and related products. It also cited a December Federal Reserve staff analysis saying money placed in stablecoins can return to banks as issuer deposits, and that banks could target better rates at customers most likely to switch.

For policy, Coin Edition reported the authors suggested regulators weigh two options: requiring issuers to hold part of their reserves as bank deposits, or deciding whether issuers may pay interest to holders.