BIS Paper Finds Higher Deposit Rates Curb Stablecoin Growth
Key points
- A BIS working paper, drawing on weekly US data from January 2019 to June 2025, finds that stablecoin market capitalisation grows more slowly when banks raise deposit rates.
- Most stablecoins pay no interest, making them less attractive relative to bank deposits whenever deposit rates rise meaningfully.
- Below approximately 3%, banks pass through very little of Federal Reserve rate changes to depositors, leaving stablecoin demand largely unaffected.
- Above the 3% threshold, banks compete more aggressively on deposit rates and the substitution effect, funds moving from stablecoins back into bank accounts, becomes more pronounced.
- The research positions bank deposit-rate policy as a practical tool that incumbents can deploy to slow stablecoin adoption, framing the competitive dynamic as rate-sensitive rather than structural.
A working paper from the Bank for International Settlements (BIS) concludes that bank deposits and stablecoins draw from the same pool of funds, and that banks hold a meaningful lever over stablecoin adoption simply by paying depositors more. The research, based on weekly United States data spanning January 2019 to June 2025, finds that periods of stronger deposit-rate competition correlate with slower stablecoin market capitalisation growth.
The mechanism is straightforward: most stablecoins offer no yield, so their relative appeal shrinks as deposit rates rise. The paper identifies a threshold around 3%, below which banks absorb most central bank rate changes rather than passing them to depositors, leaving stablecoin demand relatively undisturbed. Once rates climb above that level, banks compete more aggressively for deposits, and the substitution effect becomes measurable in stablecoin market capitalisation figures.
For operators tracking stablecoin adoption trajectories, the finding reframes the rate environment as a structural variable rather than background noise. Stablecoin growth may be partly a function of how much yield banks are willing to share with retail depositors, which means the current legislative push toward yield-bearing stablecoins in several jurisdictions carries more competitive weight than it might first appear.
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