Bank Deposit Rates May Slow Stablecoin Growth, BIS Economists Find

Preface

A working paper by economists affiliated with the Bank for International Settlements (BIS) examines how U.S. bank deposit rates relate to stablecoin market growth. Drawing on weekly data from January 2019 through June 2025, the researchers find that stablecoin capitalization grew more slowly when banks offered higher deposit rates. Their analysis points to a potential connection: when savings accounts become more attractive, some people may have less incentive to hold stablecoins that pay no interest.

The findings distinguish between Circle’s USDC and Tether’s USDT, reporting a stronger relationship for USDC. The paper does not establish that deposit rates alone determine adoption, and the authors note important limits to the evidence. It covers one high-rate cycle in which stablecoins paid holders no interest. The authors also stress that the working paper represents their views, not necessarily those of the BIS. Its central contribution is to frame deposit pricing as one factor regulators may wish to consider when setting stablecoin rules.

Lazy bag

The paper’s main takeaway is that higher bank deposit rates are associated with slower stablecoin market growth in the U.S. sample studied. Stablecoins still expanded in the researchers’ estimates, but at a reduced pace. The relationship was stronger for Circle’s USDC than for Tether’s USDT, which the authors link to USDC’s closer ties to U.S. users. They suggest policymakers consider whether issuers should be allowed to pay yield and whether reserve rules should require some funds to be held at banks. These results are informative, but are not definitive proof of causation or a forecast for every market environment.

Main Body

The question behind the research is whether the interest banks pay on deposits can affect demand for stablecoins. Stablecoins are digital tokens designed to maintain a stable value, commonly by referencing a currency such as the U.S. dollar. They can be used to transfer value or hold dollar-linked funds in digital form. But when stablecoins do not pay interest, their appeal relative to an interest-bearing bank account may change as deposit rates move.

A new BIS working paper investigates that relationship using weekly U.S. observations from January 2019 through June 2025. Its authors are BIS economist Iñaki Aldasoro and Rashad Ahmed of the Andersen Institute for Finance and Economics. They report that stablecoin market capitalization typically rose by about 15% over a 10-week span in their sample. In the authors’ baseline estimate, a one-basis-point increase in deposit rates reduced that growth to roughly 12%. Under a second method intended to better isolate cause and effect, estimated growth fell to about 6%.

These figures describe slower growth, not a decline in the stablecoin market. In both estimates, stablecoins continued to expand; the pace was simply lower when deposit rates increased. The contrast between the baseline and the second method also matters. The estimates depend on the method used, so they should be understood as results from specific analyses rather than a single guaranteed effect that will occur whenever a bank changes its rates.

Why might deposit rates matter? A person choosing where to hold funds may compare bank deposits with stablecoins. Bank accounts can offer interest, while the stablecoins in the paper’s sample paid holders no interest. When banks raise deposit rates, holding money in an account may become more appealing on financial grounds. That could reduce the relative attraction of stablecoins for some users, even if stablecoins continue to serve other purposes, such as digital transfers or access to blockchain-based services.

The authors use a feature of bank pricing behavior to help distinguish a meaningful relationship from coincidence. Banks tend to adjust savings rates only modestly while the federal funds rate remains below about 3%, but reprice more quickly after it passes that level. The researchers use this shift in how banks respond to interest-rate conditions as part of their strategy for examining whether changes in deposit rates may influence stablecoin growth. The approach is designed to make the analysis more informative about cause and effect, although it cannot remove every limitation in the underlying data or establish that the relationship applies universally.

The reported relationship also differs between two major stablecoins. The link between deposit rates and market growth was stronger for Circle’s USDC than for Tether’s USDT. The authors attribute this distinction to USDC’s closer ties to U.S. users. The result suggests that the connection between bank pricing and stablecoin demand may depend on who uses a particular token and how closely its market is connected to the U.S. financial system. It does not mean that USDT is unaffected, nor does it establish that the same pattern will hold in other countries or periods.

The paper’s broader conclusion is that banks retain some influence over the pace of stablecoin adoption through deposit pricing. This is a measured claim: banks are not described as controlling stablecoin markets, and interest rates are not presented as the only factor affecting adoption. Rather, deposit rates may act as a counterweight when users consider whether to keep funds in bank accounts or in stablecoins that do not offer yield. Other market conditions, user needs, product features, and regulatory decisions may also influence those choices.

The authors identify caveats that limit how far the findings can be applied. The evidence covers a single high-rate cycle, and stablecoins in the period studied did not pay holders interest. If issuers are permitted to offer yield in the future, the comparison between stablecoins and bank deposits could change. The sample also concerns U.S. data, so it does not automatically describe stablecoin use in other jurisdictions. Finally, the paper is a working paper: it reflects the authors’ views and does not necessarily represent the official position of the BIS.

Even with those qualifications, the analysis has direct relevance to policy discussions about stablecoin design. The authors say regulators should weigh whether stablecoin issuers may pay yield to holders. Allowing yield could affect how tokens compete with bank deposits, while restricting it could shape the relative appeal of stablecoins. The researchers also raise the trade-offs involved in requiring issuers to hold part of their reserves as bank deposits. Such a requirement could link stablecoin arrangements more closely to banks, but policymakers would need to consider the consequences for issuers, users, and the wider financial system.

Those questions are part of an active debate in Washington. Banks have lobbied against allowing stablecoin yield, and the issue featured in discussions around the failed Senate vote on the Clarity Act. Meanwhile, the OCC, FDIC, and Treasury are writing rules to implement the GENIUS Act, which takes effect in January. The source describes the GENIUS Act as having been signed into law by President Donald Trump in July of last year. It essentially legalized stablecoins in the United States and established rules for their issuance, use, and custody. How implementing regulations address yield and reserves may help determine how stablecoins interact with banks.

The BIS has examined stablecoins and the broader cryptocurrency sector for years. In 2021, it argued that the growth of blockchain-based digital dollars made central bank digital currencies more urgent. A 2023 BIS survey warned that widely adopted stablecoins could pose risks to financial stability. The new working paper adds a different angle to this policy discussion by focusing on the relationship between deposit pricing and adoption, rather than treating stablecoins solely as a payments innovation or a potential source of systemic risk.

Overall, the study presents bank deposit rates as one channel that may shape stablecoin growth. Its estimates indicate that growth was slower when rates rose, with a stronger measured relationship for USDC than for USDT. The results offer regulators a reason to examine the interaction between stablecoin yield, bank deposits, and reserve requirements, while the authors’ stated caveats argue against treating the findings as conclusive. The central question is not simply whether stablecoins will grow, but how their terms and regulatory framework may affect their relationship with conventional banking.

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