BIS finds higher deposit rates slow stablecoin growth, signalling partial substitution
Key points
- BIS researchers used weekly US data from January 2019 to June 2025 to estimate how deposit rate changes affect reserve-backed stablecoin market capitalisation.
- Ordinary least squares estimates indicate that each basis point of deposit repricing is associated with roughly a three-percentage-point reduction in stablecoin growth, against a fifteen percent average ten-week growth baseline.
- Instrumental variable estimates, exploiting the non-linear deposit pass-through once the federal funds rate exceeds approximately three percent, are about three times larger and pass a placebo test on non-stablecoin crypto assets.
- USDC shows a stronger substitution effect than USDT, consistent with USDC's closer ties to US depositors.
- The authors caution that the findings concern fund allocation rather than aggregate deposit or lending levels, and do not establish that stablecoin growth directly reduces total bank deposits.
A working paper from the Bank for International Settlements (BIS) Monetary and Economic Department concludes that reserve-backed stablecoins and bank deposits compete, at least partially, for the same pool of funds. Analysing weekly US data from January 2019 to June 2025, researchers tracked how changes in bank deposit rates preceded shifts in stablecoin market capitalisation, controlling for Treasury yields, exchange rate movements, bitcoin prices, and broader crypto market conditions.
The central finding is that deposit rate increases predict slower stablecoin growth. Ordinary least squares estimates put the reduction at roughly three percentage points per basis point of deposit repricing, against an average ten-week stablecoin growth rate of fifteen percent. Instrumental variable estimates, which exploit a non-linearity in how banks reprice deposits once the federal funds rate exceeds approximately three percent, come out roughly three times larger and pass a placebo test using non-stablecoin crypto assets. The substitution effect is more pronounced for USDC than for USDT, which the authors attribute to USDC’s closer ties to US depositors.
The paper is careful to note what it does not establish: stablecoin growth does not necessarily reduce aggregate bank deposits or total lending, since the analysis concerns asset allocation rather than balance-sheet aggregates. Nonetheless, the authors flag that if stablecoins achieve wider adoption, bank funding conditions and monetary policy transmission could both be affected. For operators monitoring stablecoin sector sizing, the implication is that deposit pricing is a meaningful variable alongside crypto-native demand drivers.