Banks Can Slow Stablecoin Growth by Paying Savers More, BIS Paper Finds

October 19, 2026 MM Crypto Team

Banks may hold a lever over stablecoin adoption after all. A working paper from Bank for International Settlements economists Rashad Ahmed and Iñaki Aldasoro finds that higher bank deposit rates measurably slow stablecoin market growth. The result reframes a debate that is often told as a one-way story — new digital dollars inevitably draining old bank deposits. The research on stablecoin deposit competition suggests something more two-sided: when banks pay savers more, some of the reason to move into stablecoins weakens, and growth cools. It does not disappear, and it does not reverse in the findings described. It slows, measurably, which is exactly the kind of evidence policymakers need when they argue about rewards, yield, and the future shape of money.

The Findings on Stablecoin Deposit Competition

The paper, titled “Are Stablecoins and Bank Deposits Substitutes?”, used weekly US data from January 2019 to June 2025. The baseline model found that a one-basis-point rise in deposit rates was associated with roughly 2.8 percentage points less cumulative stablecoin growth over the following ten weeks — about three points off an average ten-week growth rate of approximately 15%, bringing it to roughly 12%. An instrumental-variable model estimated an even larger effect: a nine-percentage-point slowdown. The authors flagged some weakness in that method, so the larger number should be treated with caution. In both cases, growth slowed but did not reverse.

Those numbers reward careful reading. A basis point is one-hundredth of a percentage point, a small move in a deposit rate. Associating even a small rate rise with roughly 2.8 percentage points less cumulative growth over ten weeks implies savers and stablecoin holders are paying attention to relative returns, not only to technology or ideology. At the same time, moving from an average ten-week growth rate of approximately 15% to roughly 12% is a slowdown within rapid growth, not a collapse. Context matters in both directions: banks have a real lever, and stablecoins kept growing in the baseline described. Anyone using the paper to claim either that banks can easily stop stablecoins or that deposit rates are irrelevant is going further than the evidence supports.

How to read the two models without overstating them

The baseline model and the instrumental-variable model answer the same question with different defenses against a classic research problem: correlation is not causation. Deposit rates rise for reasons — notably when the Federal Reserve tightens policy — and those same conditions can affect risk appetite, crypto markets, and stablecoin demand directly. An instrumental-variable approach tries to isolate the part of rate movement that is less entangled with those other forces. It produced the larger nine-percentage-point estimate, but the authors flagged some weakness in that method, so the larger number should be treated with caution.

USDC Feels It More Than USDT

The link was stronger for Circle’s USDC than for Tether’s USDT: researchers estimated USDC growth slowed by 4.8 percentage points against 1.9 percentage points for USDT — consistent with USDC’s closer ties to US users. The paper also observed that banks repriced deposit products substantially faster once the Federal Reserve’s policy rate crossed roughly 3%.

The difference between 4.8 and 1.9 percentage points is one of the paper’s most intuitive findings. If a stablecoin’s holders are mainly comparing it with a United States bank deposit — because they are US users, because they redeem into US accounts, or because they treat it as a cash-management alternative — then raising the bank’s rate directly competes with their reason to hold the token. If holders are elsewhere, using a dollar token because local banking is expensive, restricted, inflation-prone, or slow, a small change in US deposit rates is less relevant to their decision. That is consistent with USDC’s closer ties to US users, as the researchers noted, and with USDT’s well-known international footprint, although the paper’s numbers alone do not map every holder’s motive.

The repricing observation adds a banking-behavior twist. Banks do not always pass policy-rate increases to savers at the same speed. At low rates, many depositors do not shop around for a fraction of a percent, and banks can lag. Once rates become large enough to notice, competition and customer attention sharpen, and repricing accelerates. That threshold behavior matters for stablecoin deposit competition because the contest is not stablecoins against a fixed bank offer. It is stablecoins against a bank offer that changes slowly at first, then faster when money becomes expensive enough for everyone to pay attention.

Are Stablecoins and Bank Deposits Substitutes? What Substitution Really Means

The paper’s title asks whether stablecoins and bank deposits are substitutes, and the evidence points to partial substitution — enough to matter, not enough to treat the two as identical. A bank deposit is an insured or regulated claim on a bank in many cases, bundled with payments, cards, branches or apps, lending relationships, and deposit-insurance protections up to legal limits. A stablecoin is a transferable token designed to hold a stable value, usable on crypto rails at any hour, often self-custodied, and dependent on an issuer’s reserves and redemption arrangements. People can hold both for different jobs. Substitution happens at the margin: the next dollar of savings goes to whichever option offers the better mix of return, safety, convenience, and access for that holder at that moment. That marginal choice is exactly where bank deposit rates stablecoins competition plays out in practice.

The Policy Debate in Washington

The findings feed a live Washington debate. Bank of America CEO Brian Moynihan warned in January that as much as $6 trillion in deposits could move into stablecoins and related products offering returns, potentially reducing lending capacity. A December Federal Reserve staff analysis explained that money placed in stablecoins can return to banks as issuer deposits — changing who supplies banks’ funding even when total deposits stay flat. The economists argue policymakers must consider whether stablecoin issuers should be permitted to offer yield directly to tokenholders — the same yield question currently tangled up in the CLARITY Act negotiations.

The yield question at the center of the CLARITY Act fight

The economists’ policy point — whether issuers should be permitted to offer yield directly to tokenholders — is where research meets legislation. If stablecoins cannot pay yield, banks compete mainly against a payment and transfer tool. If issuers or affiliated platforms can pass reserve income to holders directly or through rewards that function like yield, stablecoins compete head-on as savings products. That is why the question is tangled up in the CLARITY Act negotiations and why banks lobby so hard on definitions. The BIS paper does not settle the legal answer. It does show why the answer matters: relative returns influence flows, so a rule that changes the return stablecoin holders can receive changes the competitive balance the paper measured. The Federal Reserve staff point also complicates the simple drain story: a bank can lose thousands of small, sticky customer deposits and gain a smaller number of large, concentrated issuer deposits, which are not equivalent funding because large deposits can leave faster and concentrate risk in fewer relationships.

Implications for Banks, Issuers, and Savers

For banks, the actionable lesson is unglamorous: pay attention to deposit pricing before customers leave, not after. If a one-basis-point rise is associated with materially slower stablecoin growth in aggregate, then competitive savings rates, transparent terms, faster transfers, and modern digital experiences are defensive tools that already exist within banking regulation. Smaller banks may worry they cannot match larger rivals on rate, but they can compete on relationship, local knowledge, and service — provided the rate gap does not grow so large that loyalty becomes an expensive donation. The repricing threshold around roughly 3% also warns managers that depositor sleepiness is conditional. Customers who ignore small differences may move quickly once differences become worth their attention. For savers, the lesson is to compare total value honestly: rate, insurance and protections, redemption reliability, fees, transfer needs, and platform risk. BIS stablecoin research does not tell any individual where to put money. It shows that, across the market, those comparisons collectively move billions in growth rates.

Risks and Limits of the Evidence

Working papers are beginnings, not verdicts. The instrumental-variable weakness the authors flagged, the unusual 2019 to June 2025 period, and the use of US weekly data all limit how confidently the exact numbers travel to other countries or future years. Stablecoin growth can also be driven by trading volumes, new listings, exchange incentives, and cross-border demand that deposit-rate models capture imperfectly. Nor does slower growth mean safer or riskier in itself: funds that stay in banks support traditional lending, funds that move to stablecoins may gain payment utility, and both systems carry their own operational and run dynamics. Sound policy will combine this evidence with supervision, reserve rules, and clear disclosure rather than treating one elasticity estimate as a complete answer.

Frequently Asked Questions

What did the BIS stablecoin research find?

Economists Rashad Ahmed and Iñaki Aldasoro found that a one-basis-point rise in deposit rates was associated with roughly 2.8 percentage points less cumulative stablecoin growth over ten weeks, from an average of approximately 15% to roughly 12%. Growth slowed but did not reverse.

Why is USDC more affected than USDT?

Researchers estimated USDC growth slowed by 4.8 percentage points against 1.9 percentage points for USDT, consistent with USDC’s closer ties to US users who directly compare it with US bank deposit rates.

What is the $6 trillion warning about?

Bank of America CEO Brian Moynihan warned in January that as much as $6 trillion in deposits could move into stablecoins and related products offering returns, potentially reducing lending capacity. A December Federal Reserve staff analysis noted money can return to banks as issuer deposits, changing who supplies funding even when totals stay flat.

Why does stablecoin yield matter to policymakers?

The economists argue policymakers must consider whether issuers should be permitted to offer yield directly to tokenholders. That is the same yield question tangled up in the CLARITY Act negotiations, because the return holders can earn changes how directly stablecoins compete with bank deposits.

Source: CoinDesk / Decrypt

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