BIS Paper: Higher Bank Deposit Rates Slow Stablecoin Growth

A working paper from the Bank for International Settlements (BIS) ties the pace of stablecoin growth to what banks pay on deposits. A one basis point rise in average deposit rates cuts ten-week growth in the market's capitalization from roughly 15% to roughly 12%.

Bankers have long warned about money draining into digital dollars. Now there is a calculation showing whether the price of a deposit can slow that drain, and by how much.

One basis point, three points of growth

According to the BIS working paper by Rashad Ahmed and Iñaki Aldasoro, a one-week rise of 0.01 percentage points in the average bank deposit rate predicts slower stablecoin growth. The baseline estimate: ten-week growth in market capitalization drops from 15% to 12%.

In numbers, that is three percentage points off, or a fifth of the pace. It sounds modest, but 0.01 points is the smallest step that exists in bank rates. By comparison, central banks usually move policy rates in increments of 25 basis points.

There is a caveat. Growth slows but does not reverse: the USDT and USDC market keeps expanding, just more slowly.

What the authors actually measured

The sample covers weekly data from January 2019 to June 2025, more than six years of observations. The researchers controlled for the bitcoin price, US Treasury yields and broader financial conditions to strip out the effect of market mood.

The mechanics need no formulas. The more a bank pays a saver, the weaker the reason to move cash into a stablecoin, and demand for digital dollars cools.

Adjusting for feedback triples the effect

A simple calculation has a trap: banks also raise rates when stablecoins grow fast, so cause and effect get tangled. The authors ran a second estimate that accounts for this and called it their preferred one.

There the effect is roughly three times larger, and ten-week growth slows to about 6%. The researchers themselves flagged a weakness in that method, though. So 12% and 6% are better read as a range than as a single figure. The direction is the same in both.

USDC slows more than USDT

The effect was stronger for Circle's USDC than for Tether's USDT. The authors linked this to the fact that USDC has closer ties to US users, who compare it directly with dollar deposits at local banks.

The USDT audience is wider geographically. Many of its holders live outside the US, and an American bank's rate is more background noise than a reason to act. For a Ukrainian buying USDT with hryvnia, the choice is usually between a stablecoin, cash dollars and a hryvnia account, not a US deposit.

Six trillion and the price of keeping a customer

The study landed in a debate where bankers are louder than academics. In January, Bank of America CEO Brian Moynihan warned that as much as $6 trillion in deposits could move into stablecoins and similar products offering a return. That would cut banks' capacity to lend and raise borrowing costs.

A December analysis by Federal Reserve staff adds a nuance. Money in stablecoins can return to banks as issuer deposits, so the total amount of deposits stays the same while the party supplying them changes. Large uninsured balances force banks to hold more liquid assets.

• To keep customers, banks have to pay more, which raises their funding costs.
• Targeted rates: by the Fed analysts' logic, a better rate can go only to those most likely to leave, with everyone else kept on a lower one.
• Fewer long-term loans if liquid reserves have to grow.

The limits of the findings and what comes next

The paper does not establish losses of bank deposits or a drop in lending. Its sample covers a single high-rate episode, and things may change once yield-bearing stablecoins and tokenized money market funds spread.

"Banks retain some influence over the pace of that adoption through deposit pricing."

- Rashad Ahmed and Iñaki Aldasoro, BIS working paper

The summary in numbers: a 0.01 point rate rise brings three to nine percentage points of slower growth over ten weeks, depending on the method. It is a brake, not an emergency stop. If the market adopts yield-bearing stablecoins quickly, the deposit price test will have to be run again.