Banks Hold a Lever Over Stablecoin Adoption, BIS Economists Say
A new working paper from BIS economists suggests that higher bank deposit rates can slow the growth of stablecoin market capitalization, particularly for USDC.
Intelligence analysis by Gemini 2.5 Flash
Economists from the Bank for International Settlements (BIS) found that when traditional banks increase their deposit rates, the growth of stablecoins tends to decelerate. This effect was more pronounced for Circle's USDC, which has stronger ties to U.S. users, compared to Tether's USDT, indicating that banks possess a significant influence over stablecoin adoption.
Imagine banks are like piggy banks that pay you a little extra money for keeping your savings with them. A new study says that when these piggy banks pay more, fewer people put their money into digital dollars called stablecoins, especially ones like USDC that are popular in the U.S. It's like if your favorite toy store started giving out free candy, you might not go to the candy store as much.
Analysis
The Bank for International Settlements (BIS) has published a working paper that delves into the competitive landscape between traditional banking and the stablecoin market, offering a unique perspective on the factors influencing digital asset adoption. The study, which utilized U.S. data spanning from January 2019 to June 2025, provides empirical evidence that the interest rates offered by banks on deposits play a significant role in determining the pace of stablecoin market expansion. This finding suggests a direct, albeit often overlooked, lever that traditional financial institutions can pull to influence the trajectory of decentralized finance.
Iñaki Aldasoro
BIS economist Iñaki Aldasoro, along with Rashad Ahmed of the Andersen Institute for Finance and Economics, authored the working paper, which posits that a rise in bank deposit rates correlates with a slowdown in stablecoin market growth. Their analysis revealed that a one-basis-point increase in deposit rates could reduce the typical 15% stablecoin market capitalization growth over a 10-week period to approximately 12%, or even 6% under a more stringent causal model. This indicates that while stablecoins continue to grow, their expansion rate is sensitive to the attractiveness of traditional savings options. The authors employed a specific methodology, leveraging the observation that banks tend to significantly increase savings rates only after the federal funds rate surpasses a certain threshold, around 3%, to isolate cause and effect.
USDC
The study found a more pronounced link between bank deposit rates and the growth of Circle’s USDC compared to Tether’s USDT. The authors attribute this difference to USDC's closer ties to U.S. users, implying that stablecoins with stronger connections to a specific national user base might be more susceptible to local banking policies and interest rate environments. This distinction is critical for understanding the varying competitive pressures faced by different stablecoins and suggests that the perceived stability and regulatory clarity of a stablecoin, alongside its user demographics, can influence its sensitivity to external financial factors. The findings underscore that not all stablecoins are impacted equally by traditional financial levers.
GENIUS Act
The paper's conclusions feed directly into a live regulatory debate in Washington concerning stablecoin issuers' ability to pay yield to holders. Banks have actively lobbied against allowing stablecoins to offer yield, a contentious issue that reportedly contributed to the failure of the Clarity Act in the Senate. Meanwhile, the OCC, FDIC, and Treasury are actively developing rules to implement the GENIUS Act, which was signed into law in July of the previous year and effectively legalized stablecoins in the U.S., establishing guidelines for their issuance, use, and custody. The BIS has historically expressed concerns about stablecoins, warning in 2023 that widespread adoption could pose risks to financial stability, and advocating for central bank digital currencies as a more urgent alternative in 2021.
Key points
- Higher bank deposit rates predict slower stablecoin market growth, according to a new BIS working paper.
- The effect was stronger for Circle’s USDC than for Tether’s USDT, linked to USDC’s closer ties to U.S. users.
- A one-basis-point increase in deposit rates could cut stablecoin market growth by several percentage points over a 10-week period.
- Regulators are debating whether stablecoin issuers should be allowed to pay yield to holders.
- The GENIUS Act, signed into law last year, legalized stablecoins in the U.S. and set rules for their issuance and custody.
If banks offer competitive deposit rates, it could lead to a more balanced financial ecosystem where traditional banking and stablecoins coexist, potentially fostering innovation while maintaining financial stability. This competition might also encourage stablecoin issuers to enhance their offerings, leading to better products for users.
Should banks aggressively use deposit rates to stifle stablecoin growth, it could hinder innovation in the crypto space and limit consumer choice, potentially leading to a less efficient digital economy. Furthermore, if regulators restrict stablecoin issuers from paying yield, it might reduce the appeal and utility of stablecoins, slowing their adoption.
