Banks could slow stablecoin growth by paying savers more, BIS paper finds

Introduction

A recent Bank for International Settlements (BIS) working paper suggests that even a modest rise in U.S. bank deposit rates can slow the rapid expansion of major stablecoins such as USDC and USDT. By analysing weekly data spanning 2019‑2025, the authors found that a one‑basis‑point increase in average deposit rates trimmed ten‑week stable‑coin market‑cap growth from roughly 15% to 12%, with an even larger effect under a preferred econometric specification.

How Deposit Pricing Influences Stable‑coin Adoption

The study by Rashad Ahmed and Iñaki Aldasoro links deposit pricing to investor behavior in two ways:

1. Opportunity Cost – Higher bank yields make traditional deposits more attractive relative to the yield‑bearing stablecoins that promise similar returns with additional crypto‑related risks.
2. Liquidity Preference – Savers who are less inclined to move funds into digital assets respond more strongly to modest rate hikes, allowing banks to retain a larger share of low‑mobility deposits.

The authors note that the impact was more pronounced for Circle’s USDC than for Tether’s USDT. USDC’s tighter regulatory ties to U.S. users likely make its holders more sensitive to domestic banking rates, whereas USDT’s broader, more global user base appears less reactive.

Implications for Banks and Regulators

• Bank Strategies – The BIS paper reinforces comments from banking executives warning that massive outflows to stablecoins could erode lending capacity. By offering slightly higher rates to retain depositors, banks can mitigate this risk, though doing so raises their own funding costs.
• Regulatory Outlook – The findings add nuance to Federal Reserve analyses that treat stable‑coin reserves as a potential source of bank funding. If banks can influence adoption through pricing, policymakers may consider encouraging transparent rate competition as a tool to balance financial stability with innovation.
• Limitations – The research covers a single high‑rate episode and does not assess long‑term effects on loan growth or overall bank profitability. Emerging yield‑bearing stablecoins and tokenized money‑market funds could alter the dynamics captured in the study.

Practical Takeaways

1. For Savers – Keep an eye on both bank deposit rates and stable‑coin yields; small changes can shift the relative attractiveness of each option.
2. For Banks – Targeted rate adjustments for high‑mobility customers can help retain deposits without broadly inflating funding costs.
3. For Investors – The sensitivity of USDC to U.S. rates suggests that regulatory and monetary policy shifts may have a more immediate impact on its market share than on USDT.

Conclusion

While higher deposit rates are unlikely to reverse the growth trajectory of stablecoins, the BIS paper demonstrates that banks retain a lever—deposit pricing—to temper that growth. As the financial ecosystem continues to blend traditional banking with digital assets, nuanced rate strategies could become a key component of both risk management and competitive positioning.