BIS paper: banks can slow stablecoin growth by paying savers more

A working paper published by the Bank for International Settlements finds that higher interest rates on bank deposits slow the growth of stablecoins, leaving banks a pricing lever against the tokens.

The paper, “Are stablecoins and bank deposits substitutes?” by Rashad Ahmed and Iñaki Aldasoro, was published October 13 as BIS Working Paper 1382. Using weekly U.S. data from January 2019 through June 2025, and accounting for bitcoin prices, Treasury yields and broader financial conditions, the authors conclude that reserve-backed stablecoins act as partial substitutes for traditional bank deposits.

The measured effect is small. When average U.S. bank deposit rates rose by one basis point, ten-week growth in stablecoin market capitalization ran roughly three percentage points lower than it otherwise would, the authors calculate, pulling the pace down from near 15% to near 12%. A second estimate, which allows for banks raising rates in response to stablecoin adoption, puts ten-week growth at about 6%, roughly nine percentage points lower, though the authors flagged weaknesses in that method. The figures are historical averages over the study window, not forecasts.

Sensitivity differed sharply by issuer. The relationship was stronger for Circle’s USDC, about 4.8 percentage points less growth per basis point, than for Tether’s USDT, at about 1.9 points, a pattern the authors said was consistent with USDC’s closer ties to U.S. users and institutions. Deposit rates showed no significant effect on non-stablecoin crypto assets, while the result held for stablecoins deployed in DeFi protocols. The authors also found the sensitivity kicks in only once the federal funds rate climbs above roughly 3%, and wrote that banks “retain some influence over the pace of that adoption through deposit pricing” .

The findings give the banking side of the debate its first formal quantification. Stablecoin market capitalization grew from under $5 billion to more than $220 billion over the study window, and Bank of America chief executive Brian Moynihan said in January that up to $6 trillion of deposits might in time migrate into stablecoins and yield-bearing products. A Federal Reserve staff analysis from December found that money placed in stablecoins can return to banks as issuer deposits, changing who supplies bank funding even when total deposits are unchanged.

The study stops short of showing actual deposit or lending losses at banks. It rests on a single stretch of high rates, and the authors write that the picture may shift as yield-bearing stablecoins and tokenized money market funds spread.