What to Know

  • A Bank for International Settlements working paper found that a one basis point rise in U.S. bank deposit rates predicted slower stablecoin growth.
  • The paper said average ten week growth in stablecoin market capitalization fell from about 15% to about 12% after such a move in deposit rates.
  • Under the authors’ preferred estimate, stablecoin growth slowed to about 6%, though the paper flagged some weakness in that method.
  • The effect was stronger for Circle’s USDC than for Tether’s USDT, a pattern linked to USDC’s closer ties to U.S. users.
  • The study reviewed weekly data from January 2019 to June 2025 and accounted for bitcoin prices, Treasury yields and broader financial conditions.
  • The paper did not establish that stablecoins caused losses of bank deposits or lending.
  • Bank executives have warned that stablecoins and related yield products could redirect deposits away from traditional lenders.
  • The findings suggest banks retain some influence over stablecoin adoption through deposit pricing, but the sample covers only one high rate period.

Banks Face a Stablecoin Pricing Challenge

U.S. banks may be able to slow the expansion of dollar linked stablecoins by offering savers more competitive deposit rates, according to a working paper from the Bank for International Settlements. The research adds a new dimension to one of the central questions in digital finance: whether tokenized dollars will pull money away from traditional bank accounts, or whether banks can defend their funding base by adjusting what they pay customers.

The paper examined stablecoins including Tether’s USDT and Circle’s USDC, two of the most widely used dollar linked tokens in the crypto market. It found that a one week, one basis point increase in average U.S. bank deposit rates predicted slower growth in stablecoin market capitalization. A basis point is a small move, equal to 0.01 percentage points, but the estimated effect was notable in the paper’s model.

Average ten week growth in stablecoin market capitalization declined from about 15% to about 12% after the deposit rate increase, the paper found. Under the authors’ preferred estimate, which attempts to account for the possibility that banks raise rates in response to stablecoin growth, the slowdown was larger, with growth easing to about 6%. However, the paper also flagged some weakness in that preferred method, meaning the result should be treated with caution rather than as a definitive measurement.

Growth Slowed but Did Not Reverse

The key takeaway for crypto markets is that higher bank deposit rates were associated with a slower pace of stablecoin expansion, not an outright contraction. In both estimates, stablecoin market capitalization continued to grow. That distinction matters because it suggests banks may be able to influence the speed of adoption, but not necessarily stop demand for tokenized dollar assets.

Stablecoins have become a major part of crypto market infrastructure because they offer a relatively stable unit of account for trading, settlement and cross platform transfers. USDT and USDC are widely used by traders seeking fast movement between digital assets and dollar linked liquidity. They also function as a bridge between crypto exchanges, decentralized finance applications and dollar based financial activity.

For banks, the competitive issue is more direct. If savers can hold digital dollar instruments or related products that offer convenience, liquidity or potential returns, traditional deposit accounts may become less attractive when banks pay relatively low rates. The BIS working paper suggests that even modest changes in deposit pricing can influence how quickly users move toward stablecoins.

USDC Appeared More Sensitive Than USDT

The paper found that the relationship between bank deposit rates and stablecoin growth was stronger for Circle’s USDC than for Tether’s USDT. The authors linked that pattern to USDC’s closer ties to U.S. users. That matters because U.S. bank deposit rates are more likely to affect users who compare stablecoin holdings against domestic savings options.

USDT and USDC often serve different user bases and market functions. USDT has long held a central role in offshore crypto liquidity and exchange trading, while USDC has been more closely associated with regulated U.S. market channels and institutional usage. The paper’s finding is consistent with the idea that a stablecoin with stronger U.S. user exposure may be more responsive to changes in U.S. banking conditions.

The difference does not mean USDC is weak or USDT is immune to banking competition. Instead, it points to how user geography, issuer structure and distribution channels can shape stablecoin demand. A token used more heavily by customers who also have access to U.S. bank deposits may naturally show a clearer response when those bank deposits become more attractive.

The Study Covered a Defined High Rate Period

The researchers, Rashad Ahmed and Iñaki Aldasoro, studied weekly data from January 2019 to June 2025. Their model accounted for bitcoin prices, Treasury yields and broader financial conditions, helping separate the influence of bank deposit rates from wider crypto market and macroeconomic forces.

That period included a high rate environment, which makes the findings important but also limits how broadly they can be applied. The paper itself noted that the sample covers only one high rate episode. Stablecoin behavior could differ in another rate cycle, particularly if crypto market structure, regulation or issuer business models change.

The authors also did not claim to prove that stablecoins caused bank deposit losses or reduced lending. Instead, the paper focused on the relationship between deposit pricing and stablecoin market capitalization growth. That distinction is important for policymakers, banks and crypto investors because it keeps the findings grounded in observed market behavior rather than broader claims about financial disintermediation.

Why Deposit Pricing Matters

Bank deposit rates are a core part of how traditional lenders compete for customer funds. When banks pay low rates, some savers may search for alternatives. When banks raise rates, keeping money in a bank account may become more attractive, especially for users who value familiarity, insurance protection or direct access to payment services.

Stablecoins complicate that competition because they are not simply another savings product. Many stablecoins are designed for payments, trading and settlement, while their issuers typically hold reserves in cash like instruments or other liquid assets. Users may adopt stablecoins for reasons beyond yield, including speed, global accessibility and integration with crypto platforms.

Even so, the BIS paper indicates that deposit rates can still matter. If bank accounts become more financially attractive, some users may slow their movement into stablecoins or reduce the pace at which they increase stablecoin balances. That does not eliminate the appeal of stablecoins, but it gives banks a lever they can use in response to digital dollar competition.

Bank Executives Have Warned About Deposit Flight

The findings arrive amid broader concern among bank leaders about how stablecoins and related products could affect deposit funding. Bank of America CEO Brian Moynihan warned in January that as much as $6 trillion in deposits could move into stablecoins and related products offering returns. Such a shift, if it occurred at scale, could reduce lending capacity and raise borrowing costs.

Those warnings reflect a broader concern that banks rely on deposits as a major funding source for lending. If a meaningful portion of deposits migrates into stablecoin products, banks may need to pay more to retain customers or find alternative funding sources. Either outcome could pressure margins and influence the availability or pricing of loans.

At the same time, the mechanics are not simple. Stablecoin reserves may end up back inside the banking system depending on where issuers place their assets. A December Federal Reserve staff analysis explained that money placed in stablecoins can return to banks as issuer deposits, changing who supplies bank funding even when total deposits remain unchanged.

Stablecoin Reserves Can Change Bank Funding Dynamics

The distinction between household deposits and issuer deposits matters. If individuals move money from personal bank accounts into stablecoins, but the issuer places reserves back into banks, total deposits in the system may not fall in a simple one for one way. However, the composition of deposits can change, and that change can affect how banks manage liquidity and lending.

Larger, uninsured balances could require banks to hold more liquid assets. If banks need to maintain more liquidity against concentrated or less stable funding, they may have less room for longer term loans. That is one reason policymakers and analysts are closely watching the growth of stablecoins, even when reserves remain within regulated financial channels.

There is also a competitive pricing issue. Paying more to retain depositors raises bank funding costs. The Federal Reserve staff analysis suggested banks could respond by offering better rates to customers most likely to switch, while keeping lower rates for less mobile depositors. That type of targeted pricing could become more important if stablecoins become a more visible alternative for savers.

What It Means for Crypto Markets

For crypto investors and stablecoin users, the BIS working paper offers a reminder that stablecoin adoption is tied not only to blockchain technology, but also to the interest rate environment and banking competition. Stablecoins may benefit when bank deposits look unattractive, while their growth can slow when banks improve deposit pricing.

The paper does not suggest stablecoins are losing relevance. On the contrary, stablecoins continued growing in the estimates even after the effect of higher deposit rates. That ongoing growth reflects their utility in crypto trading, payments and settlement. But it also shows that stablecoin demand is not isolated from traditional finance.

The next phase may depend on how yield bearing stablecoins and tokenized money market funds develop. The paper noted that its findings may change as these products gain ground. If stablecoin adjacent products offer more direct returns, the competition with bank deposits could become more intense, and banks may face greater pressure to adjust their pricing strategies.

Banks Still Have Leverage, but Not Full Control

The paper’s central message is that banks retain some influence over the pace of stablecoin adoption through deposit pricing. That influence is not absolute. Stablecoins serve many roles that bank accounts do not, especially for crypto native users and platforms that require rapid digital settlement. But deposit rates appear to be one channel through which banks can slow the migration of funds into tokenized dollars.

For policymakers, the findings add nuance to the debate over stablecoin regulation and bank disintermediation. The relationship between stablecoins and deposits is not simply a story of money leaving banks. It is also a story of changing deposit ownership, changing liquidity needs and changing competitive pressure on how banks pay savers.

For banks, the message is practical. If stablecoins become more attractive, deposit pricing may become a defensive tool. For crypto markets, the message is equally clear: stablecoin growth is shaped by more than blockchain adoption. It also responds to the basic incentives that determine where savers and traders choose to hold digital and traditional dollars.

Frequently Asked Questions (FAQs)

What did the BIS working paper find about stablecoin growth?

The paper found that a one basis point rise in U.S. bank deposit rates predicted slower growth in stablecoin market capitalization, with average ten week growth falling from about 15% to about 12%.

Did higher bank deposit rates cause stablecoin market capitalization to fall?

No. The paper found that growth slowed but did not reverse. Stablecoin market capitalization still expanded in the estimates, just at a slower pace after the increase in deposit rates.

Which stablecoins were discussed in the paper?

The paper focused on major stablecoins including Circle’s USDC and Tether’s USDT, two dollar linked tokens widely used across crypto trading and settlement activity.

Why was the effect stronger for USDC than for USDT?

The paper linked the stronger relationship for USDC to its closer ties to U.S. users, who may be more directly influenced by changes in U.S. bank deposit rates.

What data period did the researchers study?

The researchers examined weekly data from January 2019 to June 2025, while accounting for bitcoin prices, Treasury yields and broader financial conditions.

Did the paper prove that stablecoins reduce bank lending?

No. The paper did not establish losses of bank deposits or lending. It focused on the relationship between deposit pricing and the growth rate of stablecoin market capitalization.

Why do banks care about stablecoin growth?

Banks rely on deposits as an important funding source. If customers move funds into stablecoins or related products, banks may need to pay more to keep deposits or adjust their funding strategies.

Can stablecoin money return to banks?

Yes. A Federal Reserve staff analysis in December explained that money placed in stablecoins can return to banks as issuer deposits, which changes who supplies the funding even when total deposits remain unchanged.

What could change the relationship between deposits and stablecoins?

The paper noted that findings may change as yield bearing stablecoins and tokenized money market funds gain ground, because those products could alter how users compare stablecoins with bank deposits.