BIS paper finds higher deposit rates can restrain stablecoin market growth

A Bank for International Settlements (BIS) working paper by researchers Rashad Ahmed and Iñaki Aldasoro concludes that banks retain a meaningful lever over stablecoin adoption: deposit pricing. Studying weekly data from January 2019 to June 2025 and controlling for bitcoin prices, Treasury yields, and broader financial conditions, the authors found that a single basis point rise in average U.S. bank deposit rates over one week predicted a slowdown in stablecoin market capitalisation growth, compressing ten-week expansion from roughly 15% to roughly 12%.

Under the authors’ preferred specification, which adjusts for banks raising deposit rates in response to stablecoin inflows rather than independently, the dampening effect was approximately three times larger, slowing ten-week growth to around 6%. The authors themselves flagged methodological limitations with that stronger estimate. Crucially, in neither case did stablecoin growth reverse; it merely decelerated. The relationship was more pronounced for Circle‘s USDC than for Tether‘s USDT, a pattern the paper attributes to USDC’s closer alignment with U.S.-based users.

The findings arrive alongside a broader institutional debate on deposit migration. Bank of America chief executive Brian Moynihan warned in January that up to $6 trillion in deposits could shift into stablecoins and return-bearing products, which would constrain lending capacity and push up borrowing costs. A separate December Federal Reserve staff analysis had already noted that stablecoin reserves flowing back to banks as issuer deposits change the composition of bank funding even when aggregate deposit levels hold steady, and that larger uninsured balances could require banks to hold more liquid assets.

The paper does not document actual deposit losses or lending contractions, and the authors acknowledge the sample covers a single high-rate episode. How the relationship evolves as yield-bearing stablecoins and tokenised money market funds grow in scale remains an open question the paper cannot yet answer.