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1. What Does the BIS Stablecoin Paper Find?
A new Bank for International Settlements (BIS) working paper concludes that banks can slow the expansion of dollar stablecoins such as Tether's USDT and Circle's USDC by paying savers more. The researchers found that a 1 basis point increase in average U.S. bank deposit rates predicted a drop in average ten-week stablecoin market capitalization growth from about 15% to about 12%.
The paper was written by Rashad Ahmed and Iñaki Aldasoro. Its central message is a modest one: the cost of holding money in a bank account matters to people deciding whether to move into a digital dollar, and banks are therefore not powerless bystanders as the stablecoin sector grows. The authors describe the result as evidence that lenders keep some influence over the pace of adoption through the way they price deposits.
The finding arrives in the middle of a long-running argument about whether stablecoins will pull money out of the traditional banking system. Bank executives have warned that it could, while stablecoin issuers argue their products complement banks. The paper does not settle that argument, but it supplies a measured estimate of how sensitive stablecoin demand is to what banks pay.
2. How Did the Researchers Measure the Effect?
The authors worked with weekly data covering the period from January 2019 to June 2025. Using weekly observations allowed them to track short-term moves in both bank deposit pricing and the combined market value of the main dollar stablecoins, rather than relying on slower monthly or quarterly snapshots.
To avoid mistaking unrelated market forces for a deposit-rate effect, the researchers controlled for the price of bitcoin, for Treasury yields and for broader financial conditions. These controls matter because stablecoin demand tends to swell and shrink with the crypto cycle and with the returns available on safe assets. Without them, a change in deposit rates could look important simply because it happened at the same time as a rally in digital assets or a shift in interest rates elsewhere.
Within that framework, a one-week rise of 1 basis point in the average rate banks pay on deposits was followed by slower stablecoin growth. A basis point is one hundredth of a percentage point, so the move in question equals 0.01 percentage points. It is a very small change in what a saver earns, which is why the size of the reported effect stands out.
3. What Does a Single Basis Point Change?
The headline estimate is that the 0.01 percentage point increase cut average ten-week growth in stablecoin market capitalization from roughly 15% to roughly 12%. In other words, the pace of expansion over a ten-week window fell by about three percentage points in response to the slightest upward nudge in deposit pricing.
Market capitalization is the total value of stablecoins in circulation, so a slowdown in its growth means fewer new tokens are being created and held relative to what would otherwise have occurred. Stablecoins are tokens designed to hold a steady value against a currency, in these cases the U.S. dollar, and they are typically created when users hand dollars to an issuer. If savers see a more attractive return at a bank, fewer of them take that step.
The paper stresses that the effect is a slowing of growth, not a reversal. In both of the estimates it reports, stablecoin supply kept rising. The research therefore describes a brake on expansion rather than a mechanism that would shrink the market.
4. Why Is the Preferred Estimate Three Times Larger?
The authors also present a second, preferred estimate that adjusts for a problem known to researchers who study interest rates and flows of money: banks may raise their deposit rates because stablecoins are growing, not only the other way around. If lenders respond to a loss of customers by offering higher rates, a simple comparison would blur cause and effect.
Correcting for that response, the effect came out roughly three times larger, with ten-week stablecoin growth slowing to about 6%. That implies a considerably stronger link between what banks pay and how quickly stablecoins expand than the first calculation suggests.
The authors themselves flagged weaknesses in this preferred method, so the larger figure should be read with caution. Even so, the two sets of results point in the same direction. Whichever technique is used, higher deposit rates are associated with slower stablecoin growth, and in neither case does the growth turn negative.
5. Why Does USDC Respond More Than USDT?
One of the more specific results concerns the differences between the two largest dollar stablecoins. The relationship between bank deposit rates and slower growth was stronger for Circle's USDC than for Tether's USDT.
The authors connected this difference to USDC's closer ties to U.S. users. A token that is used mainly by American customers will naturally be more exposed to the rates offered by American banks, because those customers are the ones who have a bank deposit alternative in front of them. A token with a more international user base draws on savers who face different local interest rates and banking options, so U.S. deposit pricing is less likely to influence their choices.
The comparison also helps explain why the paper focuses on U.S. deposit rates in the first place. For users in the United States, a stablecoin balance and a bank balance are two ways of holding the same dollar, and the gap between what each pays can tip the decision.
6. What Is the Debate Over Deposits and Stablecoins?
The findings feed into a discussion that bank executives have pushed for some time. Bank of America CEO Brian Moynihan warned in January that up to $6 trillion in deposits could migrate into stablecoins and yield-offering products. He said such a shift could reduce the capacity of banks to lend and raise borrowing costs for households and businesses.
The concern rests on the role deposits play for a bank. Deposits are a main source of the money lenders use to make loans, so if customers move funds elsewhere, banks must replace them with more expensive funding or reduce lending. Supporters of stablecoins counter that the tokens are a payments tool and a way to access dollars, not a replacement for the credit system.
The BIS paper adds a data point to that exchange by suggesting that competition runs in both directions. If stablecoins can attract money from banks, banks can respond by offering savers more to stay. That response has a price, as the cost discussion further down explains.
7. Where Do Stablecoin Reserves End Up?
The size of the effect partly depends on where stablecoin issuers keep their reserves. A Federal Reserve staff analysis published in December explained that money placed in stablecoins can come back to the banking system as issuer deposits. When an issuer holds part of its backing assets in bank accounts, the money that left a customer's account returns to a bank, even if it is a different one.
That cycle changes who funds banks, even when total deposits stay the same. Funding from a stable base of retail depositors might be replaced by large balances held by a stablecoin issuer. Such balances can be much larger and are mostly uninsured, which makes them more likely to be withdrawn quickly in a period of stress.
For banks, this has a direct consequence. Larger, uninsured balances can force lenders to keep more liquid assets on hand so that they are able to meet withdrawals. Holding more liquid assets leaves less room for long-term loans, which are a core part of what banks do for the wider economy.
8. What Does It Cost Banks to Raise Deposit Rates?
The tool the BIS paper highlights is not free. Paying more to keep customers raises a bank's funding costs, and a bank that raises rates across the board gives up income on every account, not only on those at risk of leaving.
The Federal Reserve analysis suggested one way to limit that burden. Banks could offer better rates to the customers most likely to switch to stablecoins while keeping rates low for depositors who are less mobile. Targeting rate increases in that way would let lenders defend their funding base more cheaply than a general increase, although it assumes banks can identify which customers are most inclined to move.
The trade-off therefore sits at the center of the question. Banks can slow stablecoin growth with higher deposit pricing, but doing so squeezes their margins, and the more broadly they apply it, the more it costs.
9. What Are the Limits of the Study and What Comes Next?
The authors are explicit about what the paper does not show. It does not demonstrate actual losses of deposits or lending at banks. It measures how stablecoin growth moved when deposit rates changed, not how much money left the banking system or how that affected credit.
The sample is also narrow. It covers a single high-rate episode, so the relationship may not hold in a period when interest rates are low or falling. Savers weigh yields differently when bank accounts pay little, and stablecoin demand may then be driven more by payments, trading needs or access to dollars abroad.
The authors add that the findings could change as products evolve, specifically as yield-bearing stablecoins and tokenized money market funds grow. Those instruments offer a return directly to holders, which would narrow the gap that deposit rates currently help to open. In the words of the paper, banks retain some influence over the pace of adoption through deposit pricing, a statement that leaves open how long that influence lasts.
The study therefore works as a reference point rather than a verdict: it shows that stablecoin growth moved with small differences in deposit pricing during the period examined, and it leaves the longer-term picture to future research.