BIS: Higher Bank Rates Slow Stablecoin Growth

A Bank for International Settlements (BIS) working paper finds that higher bank deposit rates are linked to slower stablecoin growth, suggesting they can partly compete as places to hold funds. The study analysed 339 weekly US observations from January 2019 to June 2025, a period when stablecoin market capitalisation grew from under $5 billion to more than $220 billion. In the baseline estimate, a one-basis-point rise in deposit rates was associated with about three percentage points less cumulative stablecoin growth over ten weeks—roughly 12% rather than an average of 15%. An instrumental-variable estimate indicated a larger slowdown of about nine percentage points. The relationship was stronger for USDC, at 4.8 percentage points, than for USDT, at 1.9 points, and was also found among stablecoins used in DeFi. It was more pronounced when the federal funds rate was above roughly 3%; the study found no comparable relationship for other crypto assets. The findings indicate slower growth, not a decline in existing stablecoin value. They also do not establish that stablecoins reduce bank deposits or lending: issuers may hold reserves in the banking system, and the data cannot trace individual deposit flows. The results mainly reflect a high-rate period when stablecoins generally paid holders no interest. For traders, deposit rates and Federal Reserve policy may therefore offer context for stablecoin supply and demand, but the historical estimates are not a forecast of future market moves.