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A new BIS working paper shows that small rises in bank deposit rates may slow stablecoin growth.
Key Finding: Small Rate Hikes Slow Stablecoin Growth
Researchers Rashad Ahmed and Iñaki Aldasoro studied weekly data from January 2019 to June 2025.
They included bitcoin prices, Treasury yields, and broader financial conditions in their analysis.
A one-basis-point rise in average U.S. bank deposit rates is linked to slower stablecoin market growth.
Before the rate increase, ten-week stablecoin market growth averaged 15%.
After the rise, that growth dropped to about 12%.
Under the authors’ preferred model—adjusting for banks raising rates in response to stablecoin growth—the slowdown is about three times larger.
That model reduces ten-week growth to roughly 6%.
The authors note this method has limitations, especially in capturing feedback loops between stablecoin growth and bank rate changes.
Stronger Effect for USDC Than USDT
The effect was stronger for Circle’s USDC than for Tether’s USDT.
USDC’s closer ties to U.S. users explain this difference.
USDC is backed by U.S. dollar-denominated assets and operates through U.S. financial institutions.
USDT has a more decentralized reserve structure and a broader international user base.
How the Mechanism Works
When banks raise deposit rates, savers are more likely to move funds from stablecoins to bank accounts.
Stablecoins typically offer near-zero yields, making them less attractive when banks offer higher returns.
This shift reduces the share of stablecoin deposits in banks’ overall funding.
Impact on Bank Funding and Lending
Higher deposit rates increase banks’ funding costs.
Banks must pay more to attract and retain depositors.
This pressure may limit their ability to issue long-term loans.
A December Federal Reserve staff analysis shows that even with unchanged total deposits, shifts in deposit composition affect bank funding quality.
Strategic Responses by Banks
Banks may offer higher rates to customers most likely to switch from stablecoins.
They could keep lower rates for less mobile depositors.
Limitations and Future Considerations
The study covers only one high-rate period.
It cannot capture long-term or cyclical trends in stablecoin adoption.
The paper does not show actual losses in deposits or lending.
It only identifies a correlation between rate changes and stablecoin growth.
As yield-bearing stablecoins and tokenized money market funds grow, traditional deposit rate effects may weaken.
One researcher noted that when stablecoins match or exceed bank yields, user shifts decline.
DeFi and digital asset platforms may also reduce sensitivity to traditional banking rates.
Why This Matters for the Financial System
Stablecoins are a major part of global digital finance.
Traditional banks still influence user behavior through deposit pricing.
Bank of America CEO Brian Moynihan warned that up to $6 trillion in deposits could move to stablecoins.
Such a shift could reduce lending and raise borrowing costs.
One executive said the financial system could face a structural shift if large retail deposits move to digital assets.
This BIS paper adds empirical support to those concerns.
What to Watch Next
As yield-bearing stablecoins grow, the link between bank rates and stablecoin adoption may weaken.
Regulators and banks should monitor how pricing strategies affect digital asset flows.
More research is needed on how these dynamics vary by market, cycle, and regulation.
The paper does not claim stablecoin growth reversed—only that it slowed.
For now, banks retain some influence over stablecoin adoption through deposit pricing.
Source: BIS working paper, Coindesk
