Bank deposit rate hikes slow stablecoin growth, BIS study finds
A working paper by Bank for International Settlements economists found that even fractional increases in U.S. bank deposit rates curb stablecoin expansion, with Circle's USDC showing the greatest sensitivity.
U.S. banks hold a direct lever over stablecoin adoption through deposit pricing, according to a working paper published by Rashad Ahmed of the Andersen Institute for Finance and Economics and Iñaki Aldasoro of the Bank for International Settlements. Analyzing 339 weeks of U.S. data from January 2019 to June 2025, the authors found that a 1 basis point increase in bank deposit rates trimmed average 10-week stablecoin market cap growth from roughly 15% down to about 12%. Under an instrumental variable approach, growth fell even further to around 6%, shaving off up to 9 percentage points.[1][2][3][7][8]
The substitution effect proved significantly more pronounced for Circle's USDC than Tether's USDT. In baseline estimates, a 1 basis point hike reduced USDC's 10-week growth by about 4.8 to 5 percentage points, compared to roughly 1.9 to 2 percentage points for USDT. The authors attributed this difference to user composition, noting that USDC skews heavily toward U.S. institutions and DeFi users with closer domestic banking links, while USDT is driven primarily by offshore markets and developing economies.[1][2][4][5][8][9]
The research lands amid heated debates regarding yield and stablecoin legislation. While the GENIUS Act bars issuers from directly paying interest, traditional financial institutions contend third-party rewards could still siphon deposits away from banking channels. Even so, major institutions like JPMorgan, Bank of America, and Wells Fargo continue to pay zero interest across $1.6 trillion in customer deposits, leaving room for banks to alter competitive flows if they choose to raise deposit rates.[2][4][5][6][9]
Key facts
- A working paper by Rashad Ahmed and Iñaki Aldasoro examined 339 weeks of U.S. data from January 2019 to June 2025, tracking stablecoin growth as reserve-backed market cap climbed from under $5 billion to more than $220 billion.
- A 1 basis point (0.01 percentage point) increase in U.S. bank deposit rates was linked to a drop in 10-week stablecoin market capitalization growth from an average of 15% to about 12%.
- Under an instrumental variable methodology, the 1 basis point hike cut stablecoin market cap growth by up to 9 percentage points, down to about 6%.
- Circle's USDC showed higher sensitivity than Tether's USDT, dropping approximately 4.8% to 5% in 10-week growth compared to a roughly 1.9% to 2% drop for USDT.
- The authors attributed the responsiveness gap to USDC's focus on U.S. institutions and DeFi participants, whereas USDT skews toward offshore markets and developing economies.
- JPMorgan, Bank of America, and Wells Fargo still pay zero interest on $1.6 trillion of deposits, according to the Financial Times.
Sources · 9 sources
- DE
DecryptArticle ·
Banks Hold a Lever Over Stablecoin Adoption, BIS Economists Say A Bank for International Settlements working paper found that stablecoin growth slows when U.S. banks raise deposit rates, with Circle’s USDC most sensitive.
Open source - UN
UnchainedArticle ·
Stablecoin Growth Cooled as Deposit Rates Rose, With USDC Most Exposed, Working Paper Says When U.S. banks paid savers more, stablecoins grew more slowly, according to a Bank for International Settlements working paper published on Oct. 13. Its authors, Rashad Ahmed of the Andersen Institute for Finance and Economics and Iñaki Aldasoro of the BIS, describe the study as, to their knowledge, “the first empirical evidence” that changes in deposit rates affect stablecoin flows. The paper states the views of its authors, not necessarily those of the BIS or its member central banks. Their bottom line: “The size of the stablecoin sector therefore depends in part on how banks price deposits.” Get Unchained’s crypto news in your inbox with the free Unchained Daily newsletter . What the Data Show The study covers 339 weeks of U.S. figures, running from January 2019 into June 2025 , a stretch in which reserve-backed stablecoin market capitalization went from under $5 billion to more than $220 billion . Over that period, stablecoin market value rose an average of about 15% in a 10-week window. Under their baseline estimate, a 1 basis point rise in deposit rates was followed by 10-week growth of about 12% . A second method, which exploits banks passing on a much larger share of Fed rate increases once the federal funds rate is above about 3%, put the figure near 6% . That method did not predict moves in the rest of the crypto market, a check the authors used to rule out a broad crypto cycle. The response was larger for Circle’s USDC than for Tether’s USDT : the baseline estimate trimmed about 5% from USDC’s 10-week growth, against roughly 2% for USDT. The authors attribute the gap to differing user bases: USDC skews toward U.S. institutions and DeFi participants, USDT toward offshore activity and developing economies. The Caveats “Growth slows but does not necessarily reverse,” the authors wrote. The statistical strength of their second method, a first-stage F-statistic of 9.78 , fell just below the conventional benchmark of 10, “suggesting some instrument weakness.” The sample covers one high-rate period, 2022 to 2025, and the aggregate data can’t show which holders switched or which banks were affected. Because issuers reinvest the money, a move into stablecoins could shift deposits between banks rather than shrink the total, they wrote. The results also describe a market where stablecoins pay holders nothing. “A small but growing segment of yield-bearing stablecoins and tokenized money market funds may alter the substitution margin over time,” the paper said. The Yield Debate The paper arrives during a policy debate over stablecoin rewards. The GENIUS Act bars issuers from paying interest, but banks have argued that rewards offered through third-party platforms could draw money out of deposits. In September, the Federal Reserve proposed treating yield routed through an issuer’s affiliates or other connected outside parties as presumptively barred. Ahmed and Aldasoro wrote that banks “retain some influence over the pace of that adoption through deposit pricing.” For regulators, they suggested weighing whether part of stablecoin reserves should sit in bank deposits, which could cushion bank funding but pile large uninsured deposits into a few banks, and whether issuers may pay holders at all. Related Listen: Ledger Wallets Were Drained of $100 Million. Is Self-Custody Still Safe? The post Stablecoin Growth Cooled as Deposit Rates Rose, With USDC Most Exposed, Working Paper Says appeared first on Unchained .
Open source - CO
CoindeskArticle ·
Banks could slow stablecoin growth by paying savers more, BIS paper finds A BIS working paper found a 1 basis point rise in U.S. bank deposit rates predicted slower stablecoin growth, cutting ten-week growth from 15% to 12%.
Open source - CN
crypto.news@cryptodotnewsPost on X ·
JUST IN: BIS study finds a small bank deposit rate hike can slow stablecoin growth A 0.01 percentage-point increase in U.S. deposit rates was linked to roughly a 3-point drop in stablecoin market-cap growth over 10 weeks, with a stronger effect on $USDC than $USDT, while major banks still pay no interest on $1.6T in deposits.
Open source - CB
Coin Bureau@coinbureauPost on X ·
🚨HUGE: Bank for International Settlements study finds banks can CUT stablecoin growth by 3 points just by raising deposit rates 0.01%. A 1 basis point rise in US deposit rates cuts stablecoin market cap growth by roughly 3 percentage points over 10 weeks, against average growth of about 15%. The effect is stronger for USDC than USDT, which the authors link to USDC’s closer ties to US savers. Meanwhile, JPMorgan, BofA and Wells Fargo still pay nothing on $1.6 TRILLION of their deposits, per the FT.
Open source - CB
Crypto BriefingArticle ·
BIS paper finds banks could slow stablecoin growth by raising rates Rising bank rates could curb stablecoin growth, impacting monetary policy, regulation, and competition between banks and digital currencies. The post BIS paper finds banks could slow stablecoin growth by raising rates appeared first on Crypto Briefing .
Open source - TW
The Wolf Of All Streets@scottmelkerPost on X ·
NEW: BIS CONFIRMS STABLECOINS ACT AS PARTIAL SUBSTITUTES FOR BANK DEPOSITS AS HIGHER DEPOSIT RATES CUT STABLECOIN GROWTH BY UP TO 9 PERCENTAGE POINTS
Open source - WB
Wu Blockchain@WuBlockchainPost on X ·
BIS: Stablecoins and Bank Deposits Act as Substitutes as Deposit Hikes Slow Stablecoin Growth BIS (Bank for International Settlements) working paper finds that stablecoins and bank deposits act as direct portfolio substitutes. Analyzing U.S. data, the authors show that a 1-basis-point hike in bank deposit rates cuts 10-week stablecoin market cap growth by roughly 3 percentage points (and up to ~9 percentage points under an IV approach). The substitution effect is significantly stronger for onshore-tied USDC (-4.8%) than offshore-centric USDT (-1.9%) and holds across bank CD rates and DeFi lending yields, demonstrating that traditional bank deposit pricing exerts an active drag on stablecoin growth.
Open source - BL
BlockNews@blocknewsdotcomPost on X ·
🚨 HUGE: A Bank for International Settlements study finds that raising U.S. bank deposit rates by just 0.01% could reduce stablecoin market cap growth by roughly 3 percentage points over 10 weeks. 👀 The impact is reportedly stronger for $USDC than $USDT, reflecting USDC’s closer ties to American savers. Meanwhile, JPMorgan, Bank of America and Wells Fargo still pay ZERO interest on $1.6 TRILLION in deposits, according to the Financial Times.
Open source