2026

Stablecoin

USDC

Bank

when

Stablecoin market growth has slowed when U.S. banks raised deposit interest rates, with new research finding that a one-basis-point increase in deposit rates was associated with roughly three percentage points less stablecoin market capitalization growth over ten weeks.
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 <li>BIS researchers found higher deposit rates were associated with slower stablecoin growth over ten weeks.</li>
 <li>&nbsp;A one-basis-point deposit rate rise corresponded to roughly three percentage points less stablecoin market growth.</li>
 <li>Researchers estimated USDC growth slowed by 4.8 percentage points, versus 1.9 percentage points for USDT.</li>
 <li>&nbsp;An instrumental-variable model estimated a larger nine-percentage-point slowdown following a one-basis-point increase in deposit rates.</li>
 <li>&nbsp;Similar substitution patterns appeared in certificates of deposit and decentralized finance lending scenarios, researchers found.</li>
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In an October 13 working <a href="https://www.bis.org/publications/working-paper-1382-are-stablecoins-and-bank-deposits-substitutes.pdf" rel="noopener noreferrer nofollow">paper</a> titled Are Stablecoins and Bank Deposits Substitutes?, economists Rashad Ahmed and Iñaki Aldasoro examined weekly U.S. data from January 2019 to June 2025. Their findings suggest that consumers and investors respond to the returns offered by traditional bank accounts when deciding how much money to hold in stablecoins.
The study found a stronger relationship for Circle’s USDC than for Tether’s USDT. It identified similar behavior across bank certificates of deposit and stablecoins supplied to decentralized lending platforms.
The researchers cautioned that their findings do not establish that stablecoin adoption has reduced total bank deposits or lending across the U.S. banking system.
You might also like: <a href="https://crypto.news/bitcoin-onchain-transfers-vary-sixfold-in-bis-study/" rel="noopener noreferrer nofollow"> Bitcoin onchain transfers vary sixfold in BIS study </a>
<h2 class="wp-block-heading" id="strong-higher-bank-deposit-rates-linked-to-slower-stablecoin-growth-strong">Higher bank deposit rates linked to slower stablecoin growth</h2>
The working paper examines whether stablecoins compete with traditional bank deposits for funds, particularly when banks offer customers better interest rates.
Both products can serve as relatively stable stores of value and support payments. Their financial returns differ because conventional bank deposits can pay interest, while major payment stablecoins generally do not pay interest directly to holders.
Using weekly observations, the researchers compared changes in U.S. deposit rates with subsequent changes in the market capitalization of reserve-backed stablecoins.
Their baseline statistical model found that a one-basis-point rise in deposit rates was associated with approximately 2.8 percentage points less cumulative stablecoin growth over the following ten weeks.
A basis point equals 0.01 percentage point. The estimated relationship therefore concerns a relatively small change in bank deposit yields.
For context, average stablecoin market capitalization growth over a ten-week period was approximately 15% in the study’s sample.
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 JUST IN: BIS study finds a small bank deposit rate hike can slow stablecoin growth A 0.01 percentage-point increase in U.S. deposit rates was linked to roughly a 3-point drop in stablecoin market-cap growth over 10 weeks, with a stronger effect on <a href="https://x.com/search?q=%24USDC&amp;src=ctag&amp;ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">$USDC</a> than <a href="https://x.com/search?q=%24USDT&amp;src=ctag&amp;ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">$USDT</a>, while major… <a href="https://t.co/M8Uwu0I3MA" rel="noopener noreferrer nofollow">pic.twitter.com/M8Uwu0I3MA</a>— crypto.news (@cryptodotnews) <a href="https://x.com/cryptodotnews/status/2111519010651332656?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">October 17, 2026</a>
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Applying the rounded baseline estimate would reduce that growth rate to roughly 12%. The calculation describes a slowdown in growth, not necessarily a decline in the total market capitalization of stablecoins.
The authors controlled for the federal funds rate, U.S. Treasury yields, dollar movements, Bitcoin prices and stock market volatility when estimating the relationship.
They used those variables to separate changes in the return on bank deposits from other economic and cryptocurrency market conditions that might influence stablecoin demand.
The paper identifies the relationship as evidence that stablecoins and bank deposits are partial substitutes, meaning their users may change their holdings when the relative financial benefits change.
<h2 class="wp-block-heading" id="strong-bis-researchers-estimate-a-stronger-effect-using-another-model-strong">BIS researchers estimate a stronger effect using another model</h2>
To examine whether the baseline results understated the relationship, the researchers used a second statistical approach known as instrumental variables.
Their analysis draws on how banks adjust customer deposit rates when the federal funds rate rises.
According to the paper, banks tend to respond more slowly to monetary policy changes when interest rates are relatively low. Once the federal funds rate moves above approximately 3%, deposit rates become more sensitive to further policy changes.
The researchers used this difference in bank pricing behavior to estimate the effect of higher deposit rates on stablecoin demand.
Their instrumental-variable model produced an estimated 9.1-percentage-point reduction in cumulative stablecoin market capitalization growth over ten weeks for a one-basis-point deposit rate change.
The result was roughly three times the baseline estimate of 2.8 percentage points.
However, the larger figure comes from a different statistical method that focuses on rate changes during higher-interest-rate conditions. It does not mean every one-basis-point deposit rate rise will reduce stablecoin growth by 9.1 percentage points in every market environment.
The authors conducted additional checks involving cryptocurrency trading volumes and major crypto market disruptions, including the collapse of TerraUSD, the failure of FTX and the phaseout of Binance’s BUSD.
After accounting for those episodes, the estimated relationship remained negative.
A separate test examined cryptocurrencies outside the stablecoin sector. The researchers found that their instrumental-variable approach did not predict comparable changes in the market capitalization of non-stablecoin cryptoassets.
The paper used this result to test whether the estimated relationship was driven by movements affecting the cryptocurrency market generally.
<h2 class="wp-block-heading" id="strong-usdc-reacts-more-strongly-to-bank-rates-than-usdt-strong">USDC reacts more strongly to bank rates than USDT</h2>
The research identifies a clear difference between the two largest dollar-backed stablecoins.
Over the ten-week period, the baseline estimates associated a one-basis-point deposit rate rise with a 4.8-percentage-point reduction in USDC’s cumulative market capitalization growth.
For USDT, the corresponding estimate was 1.9 percentage points. The estimated response for USDC was therefore approximately 2.5 times the size of the response recorded for USDT.
According to the authors, USDC’s stronger sensitivity is consistent with its closer connections to U.S. institutional users and domestic financial markets.
USDT serves a larger international market, including users outside the United States whose financial decisions may depend on local banking arrangements and access to dollar assets.
The paper does not determine exactly how individual users moved funds between bank accounts and stablecoins. Its findings come from statistical relationships between deposit rates and changes in stablecoin market capitalization.
The researchers examined whether their results remained consistent when replacing ordinary deposit rates with rates offered on certificates of deposit, commonly known as CDs.
Their estimates continued to show a negative relationship between bank deposit returns and stablecoin growth.
The study found similar behavior among stablecoins supplied to decentralized finance lending protocols, even after accounting for the yields available through those platforms.
The authors interpreted the findings as further evidence that bank deposit pricing influences demand for stablecoins across different uses.
<h2 class="wp-block-heading" id="strong-stablecoin-findings-enter-debate-over-u-s-banking-rules-strong">Stablecoin findings enter debate over U.S. banking rules</h2>
The research arrives while U.S. banks and crypto companies continue debating how regulated stablecoins should operate alongside traditional deposits.
In May, crypto.news reported that <a href="https://crypto.news/banks-push-back-on-genius-act-stablecoin-rules/" rel="noopener noreferrer nofollow">banking groups challenged stablecoin rules</a> proposed under the GENIUS Act, raising concerns about the possible movement of customer funds away from banks.
The American Bankers Association and Bank Policy Institute requested changes to the timing of federal consultations, arguing that rules from different banking regulators needed to be considered together.
Banking representatives have questioned whether stablecoin rewards offered through exchanges and other intermediaries could encourage customers to move funds out of insured deposit accounts.
In January, U.S. community banking representatives <a href="https://crypto.news/bankers-warn-stablecoin-yield-loophole-could-drain-main-street-deposits/" rel="noopener noreferrer nofollow">warned about stablecoin rewards</a>, arguing that indirect yield arrangements could compete with deposit products.
The research examines a related question from the opposite direction: whether banks paying customers more interest can influence stablecoin holdings.
Banks have been exploring their own blockchain-based products while regulators develop stablecoin requirements.
In June, Custodia Bank and Vantage Bank <a href="https://crypto.news/custodia-and-vantage-test-dual-purpose-token-for-bank-deposits-and-stablecoins/" rel="noopener noreferrer nofollow">tested a dual-purpose token</a> designed to operate as a bank deposit within a banking network and as a stablecoin outside it.
The project was intended to allow participating banks to offer blockchain transfers while retaining a connection to their existing deposit infrastructure.
Separately, Katana CEO Matthew Fisher said in September that <a href="https://crypto.news/bank-stablecoins-earn-defi-yield-holders-bear-risk/" rel="noopener noreferrer nofollow">stablecoin holders could earn</a> returns through independent decentralized lending protocols, although those arrangements would expose participants to risks beyond conventional bank deposit products.
The BIS paper does not assess how the GENIUS Act has affected stablecoin demand. Its underlying dataset ends in June 2025, before the October 2026 publication.
Ahmed and Aldasoro wrote that their findings concern a period covering one major cycle of elevated U.S. interest rates. They acknowledged that the relatively short history of the stablecoin sector limits what their data can establish about long-term banking behavior.
The working paper presents the views of its authors, not an official policy position of the BIS or its member central banks.
Read more: <a href="https://crypto.news/chainalysis-66-9-of-tokenized-u-s-treasuries-held-abroad/" rel="noopener noreferrer nofollow"> Chainalysis: 66.9% of tokenized U.S. Treasuries held abroad </a>

BIS: Bank rate hikes cut stablecoin growth by 3 points

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