Banks Could Curb Stablecoin Growth by Raising Deposit Interest Rates, BIS Working Paper Finds
Key Takeaways
- •A BIS working paper by researchers Rashad Ahmed and Iñaki Aldasoro found that higher bank deposit rates are associated with slower growth in major stablecoins such as USDT and USDC.
- •Drawing on U.S. data from January 2019 to June 2025, the study tied a one-basis-point rise in deposit rates to a drop in 10-week average stablecoin market capitalisation growth from about 15% to 12%.
- •The rate effect was more pronounced for Circle's USDC than for Tether's USDT, which the researchers linked to USDC's stronger connections with U.S. users.
- •Because most stablecoins pay little or no interest, the findings point to direct competition between stablecoins and interest-bearing bank deposits for the same funds.
- •The study does not establish that stablecoin growth reduces overall bank deposits or lending, and its results reflect a period of relatively high interest rates.
Banks could slow the growth of major stablecoins such as Tether's USDT and Circle's USDC by offering savers higher interest rates, according to a working paper by the Bank for International Settlements (BIS), the Basel-based institution often described as the central bank for central banks.
Researchers Rashad Ahmed and Iñaki Aldasoro analysed U.S. data covering January 2019 to June 2025. Their study found that a one-basis-point increase in bank deposit rates was associated with a decline in average stablecoin market capitalisation growth over 10 weeks, from about 15% to 12%.
The findings suggest that stablecoins and bank deposits compete for some of the same funds. Because most stablecoins pay little or no interest to holders, better returns on traditional savings accounts could encourage users to move money back into banks.
The effect was stronger for Circle's USDC than for Tether's USDT, which the researchers said was consistent with USDC's closer ties to U.S. users.
The paper adds to concerns among banks that stablecoins could draw deposits away from traditional lenders, potentially raising funding costs and affecting lending capacity. However, the study does not establish that stablecoin growth necessarily reduces total bank deposits or lending, and its findings are based on a period of relatively high interest rates. That caveat is worth noting: the paper's data does not show how the deposit-rate trade-off would behave in a different rate environment, leaving that question open for banks, stablecoin issuers, and policymakers to weigh.
Stablecoins are blockchain-based tokens typically pegged to fiat currencies such as the U.S. dollar. Tether's USDT and Circle's USDC are the two largest such tokens by market capitalisation, and their rapid growth in recent years has drawn increasing scrutiny from central banks and regulators worldwide, with the BIS among the institutions that have repeatedly highlighted the trend. The working paper contributes a quantitative data point to that scrutiny, identifying bank deposit pricing as one variable that appears to influence how quickly stablecoins grow.
This article is based on a report first published by BitcoinKE.
