A working paper published by the Bank for International Settlements (BIS) — the Basel-based institution known as the central bank for central banks — finds that higher bank deposit rates can slow stablecoin growth, as savers shift money toward interest-bearing accounts. Researchers Rashad Ahmed and Iñaki Aldasoro analyzed weekly U.S. data from January 2019 through June 2025. Their findings show that USDC responds more strongly to deposit-rate increases than USDT, and that stablecoin demand weakens as bank deposit yields become more competitive, particularly when the U.S. federal funds rate exceeds approximately 3%.

The study, published October 13, 2026, as BIS Working Paper 1382, examines whether stablecoins and bank deposits compete for the same funds. According to the paper, a one-basis-point increase in deposit rates corresponds to roughly three percentage points less stablecoin market capitalization growth over 10 weeks. An instrumental variables approach produced a larger estimated effect of approximately nine percentage points.

Deposit Rates Reduce Stablecoin Market Growth

During the study period, stablecoin market capitalization grew from less than $5 billion to more than $220 billion, even as growth proved sensitive to shifts in deposit pricing. Average 10-week market capitalization growth over the period stood at approximately 15%. Stablecoins are digital tokens pegged to fiat currencies such as the U.S. dollar, which makes them the crypto category most directly comparable to bank deposits.

The researchers also identified a threshold near a 3% federal funds rate. Below that level, banks tend to pass limited rate increases on to depositors. Above it, competitive pressure encourages banks to offer better returns, making non-interest-bearing stablecoins less attractive to holders.

USDC Shows Stronger Response Than USDT

The effect varied between the two major stablecoins. USDC, issued by Circle, recorded approximately 4.8 percentage points less market capitalization growth for each one-basis-point increase in deposit rates, while USDT, issued by Tether, showed a smaller response of around 1.9 percentage points. The paper associates USDC more closely with U.S. institutions, whereas USDT maintains a stronger offshore presence.

However, the substitution effect was not limited to direct stablecoin holdings. The researchers found that the relationship also held for stablecoins used in decentralized finance (DeFi) protocols. By contrast, bank deposit rates had no significant effect on other crypto assets outside the stablecoin category, underscoring that the sensitivity is specific to stablecoins rather than crypto assets broadly.

Study Tracks Monetary Policy and Stablecoin Demand

The analysis covers periods of low interest rates, subsequent monetary tightening, and rapid stablecoin market expansion. Because most stablecoins do not pay holders interest, higher bank deposit yields can change where investors keep their money. That dynamic places stablecoins in direct competition with bank deposits for rate-sensitive savings, a question that intersects directly with central bank concerns about deposit funding — as the BIS's own publication of the research reflects.

The findings identify bank deposit pricing as a factor associated with stablecoin growth. They also connect stablecoin demand with broader monetary conditions, particularly when the federal funds rate rises above approximately 3%, the level at which competition for deposits intensifies. Because the sample ends in June 2025, the estimates describe historical rate environments rather than current conditions, leaving the identified threshold as a reference point for tracking how deposit competition and stablecoin growth interact as conditions change.