BIS paper: higher bank deposit rates could slow stablecoin growth

Stablecoin growth could be slowed if banks pay savers more, according to a working paper published by the Bank for International Settlements. Researchers Rashad Ahmed and Iñaki Aldasoro examined weekly data from January 2019 through June 2025, factoring in bitcoin prices, Treasury yields and broader financial conditions, and found that even a modest one basis point rise in average bank deposit rates over a week predicted slower expansion of stablecoin market capitalization.

The magnitude was notable: that 0.01 percentage point increase reduced average ten-week stablecoin market-cap growth from roughly 15% to about 12%. Under the authors' preferred estimate, which adjusts for banks raising rates in response to stablecoin growth, the effect was about three times larger, bringing growth down to around 6% — though the authors noted some weakness in that method. In both cases, growth decelerated but did not reverse.

The relationship was more pronounced for Circle's USDC than for Tether's USDT, which the authors said aligns with USDC's closer ties to U.S. users. The findings give empirical weight to a debate that has drawn warnings from bank leaders; Bank of America CEO Brian Moynihan cautioned in January that as much as $6 trillion in deposits could shift into stablecoins and related yield-bearing products, potentially squeezing lending capacity and pushing up borrowing costs.

Part of the dynamic hinges on where stablecoin issuers hold their reserves. A December Federal Reserve staff analysis explained that funds placed in stablecoins can return to banks as issuer deposits, altering who supplies banks' funding even when total deposits stay the same. Larger, uninsured balances could also require banks to hold more liquid assets, leaving less room for long-term loans.

Paying more to keep customers carries its own cost by raising banks' funding expenses. The Fed analysis suggested institutions could offer better rates to customers most likely to switch while maintaining lower rates for less mobile depositors.

The BIS paper does not establish actual losses of bank deposits or lending. Its sample covers a single high-rate episode, and the authors noted findings may shift as yield-bearing stablecoins and tokenized money market funds gain ground. Still, they concluded that banks retain some influence over how quickly stablecoins are adopted through their deposit pricing.