BIS Paper Finds Higher Bank Deposit Rates Could Slow USDT and USDC Stablecoin Growth
A working paper from the Bank for International Settlements (BIS) finds that higher bank deposit rates may slow the growth of stablecoins such as Tether's USDT and Circle's USDC. The research suggests banks retain some influence over stablecoin adoption by offering more competitive returns to depositors, although the findings do not establish that stablecoins have already reduced bank deposits or lending.
Researchers Rashad Ahmed and Iñaki Aldasoro analyzed weekly data from January 2019 through June 2025, accounting for Bitcoin prices, Treasury yields and broader financial conditions. Their results linked increases in average bank deposit rates with slower subsequent growth in stablecoin market capitalization.
Higher Deposit Rates Linked to Slower Stablecoin Growth
In the researchers' baseline estimate, a one-week increase of one basis point in average bank deposit rates predicted a reduction in average stablecoin market capitalization growth over the following ten weeks. One basis point equals 0.01 percentage points. Under this estimate, average ten-week growth declined from approximately 15% to about 12%.
The authors also examined a preferred estimate that adjusts for the possibility that banks raise deposit rates in response to stablecoin growth. Under that approach, the estimated effect was roughly three times larger, reducing ten-week growth to around 6%. However, the researchers noted weaknesses in this method, which means the larger estimated impact should be interpreted with caution.
Both estimates indicated slower expansion rather than a reversal in stablecoin growth. The results suggest that deposit pricing could influence the pace of adoption, but they do not show that higher bank rates would cause the stablecoin market to contract.
USDC Shows a Stronger Relationship Than USDT
The relationship between deposit rates and stablecoin growth was stronger for Circle's USDC than for Tether's USDT. The authors said this pattern was consistent with USDC having closer ties to U.S. users.
The findings contribute to an ongoing debate over whether stablecoins and related products offering returns could draw funds away from traditional bank deposits. In January, Bank of America CEO Brian Moynihan warned that as much as $6 trillion in deposits could move into stablecoins and related yield-bearing products, potentially reducing banks' capacity to lend and increasing borrowing costs.
That figure was a warning about a potential outcome, not a finding that $6 trillion has already left the banking system.
Stablecoin Reserves Could Change Bank Funding
The potential impact on banks also depends on how stablecoin issuers manage their reserves. A Federal Reserve staff analysis published in December explained that funds used to purchase stablecoins can return to banks as deposits held by the issuers. As a result, stablecoin adoption can change which customers supply banks with funding even if the banking system's total deposits remain unchanged.
The composition of those deposits matters. Larger balances that are uninsured could lead banks to hold more liquid assets, potentially leaving less capacity for longer-term lending. Banks may also face higher funding costs if they increase deposit rates to retain customers.
The Federal Reserve analysis suggested banks could respond selectively by offering better rates to customers most likely to move their money while maintaining lower rates for depositors who are less likely to switch.
BIS Researchers Highlight Limits of the Findings
The BIS paper does not establish that stablecoins have caused bank deposit losses or reduced lending. Its data cover one period of high interest rates, and the relationship could change as yield-bearing stablecoins and tokenized money market funds become more prominent.
The authors summarized the role of traditional banks by writing that they “retain some influence over the pace of that adoption through deposit pricing.” The research therefore points to deposit rates as one factor that may shape stablecoin growth, rather than a guarantee that banks can prevent wider adoption.
source: coindesk.
Writer: Ethan Collins
Crypto Journalist
Ethan Collins reports on developments across the cryptocurrency and blockchain sector. His work covers market movements, protocol updates, regulatory changes, and emerging trends in digital assets.
He focuses on presenting complex topics in a clear and accessible manner for a broad readership.
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