Higher

Stablecoin

USDC

Stronger

Bank

<ul>
 <li>A BIS study found that a one-basis-point increase in deposit rates corresponds to roughly three percentage points less stablecoin market cap growth over 10 weeks.</li>
 <li>USDC showed a stronger response to rising deposit rates, with growth falling 4.8 percentage points per basis point versus 1.9 points for USDT.</li>
 <li>Stablecoin demand weakens as bank deposit yields become more competitive, particularly when the U.S. federal funds rate exceeds approximately 3%.</li>
</ul>
<p>A Bank for International Settlements (BIS) <a href="https://www.bis.org/publications/working-paper-1382-are-stablecoins-and-bank-deposits-substitutes.pdf" rel="noopener noreferrer nofollow">working</a> paper finds that higher bank deposit rates can slow stablecoin growth, as savers shift money toward interest-bearing accounts. Researchers Rashad Ahmed and Iñaki Aldasoro analyzed weekly U.S. data from January 2019 through June 2025. Their findings show that USDC responds more strongly to deposit-rate increases than USDT.</p>
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<h2 class="wp-block-heading" id="strong-deposit-rates-reduce-stablecoin-market-growth-strong"><strong>Deposit Rates Reduce Stablecoin Market Growth</strong></h2>
<p>Published October 13, 2026, as BIS Working Paper 1382, the study examines whether <a href="https://cryptofrontnews.com/coinbase-and-citi-expand-stablecoin-payments-for-global-firms/" rel="noopener noreferrer nofollow">stablecoins</a> and bank deposits compete for the same funds. The researchers found that a one-basis-point increase in deposit rates corresponds to roughly three percentage points less stablecoin market capitalization growth over 10 weeks.</p>
<p>An instrumental variables approach produced a larger estimated effect of approximately nine percentage points. During the study period, stablecoin market capitalization grew from less than $5 billion to more than $220 billion. Average 10-week market capitalization growth stood at approximately 15%.</p>
<p>The researchers also identified a threshold near a 3% federal funds rate. Below that level, banks tend to pass limited rate increases to depositors. Above it, competitive pressure encourages banks to offer better returns, making non-interest-bearing stablecoins less attractive.</p>
<h2 class="wp-block-heading" id="strong-usdc-shows-stronger-response-than-usdt-strong"><strong>USDC Shows Stronger Response Than USDT</strong></h2>
<p>The effect varied between major stablecoins. USDC recorded approximately 4.8 percentage points less market capitalization growth for each one-basis-point increase in deposit rates. USDT showed a smaller response of around 1.9 percentage points.</p>
<p>The paper associates <a href="https://cryptofrontnews.com/circle-reports-1-4b-revenue-as-usdc-volume-hits-36t/" rel="noopener noreferrer nofollow">USDC</a> more closely with U.S. institutions, while USDT has a stronger offshore presence. However, the substitution effect extended beyond direct stablecoin holdings.</p>
<p>The researchers found that the relationship also held for stablecoins used in decentralized finance (DeFi) protocols. By contrast, bank deposit rates had no significant effect on other crypto assets outside the stablecoin category.</p>
<h2 class="wp-block-heading" id="strong-study-tracks-monetary-policy-and-stablecoin-demand-strong"><strong>Study Tracks Monetary Policy and Stablecoin Demand</strong></h2>
<p>The analysis covers periods of low interest rates, subsequent monetary tightening, and rapid stablecoin market expansion. Because most stablecoins do not pay holders interest, higher bank deposit yields can change where investors keep their money.</p>
<p>The findings identify bank deposit pricing as a factor associated with <a href="https://cryptofrontnews.com/clarity-act-failure-exposes-republican-split-over-stablecoin-yield-rules/" rel="noopener noreferrer nofollow">stablecoin growth</a>. They also connect stablecoin demand with broader monetary conditions, particularly when the federal funds rate rises above approximately 3%.</p>

BIS Finds Higher Bank Rates Slow Stablecoin Growth

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