BIS Paper Finds a 1-Basis-Point Deposit Rate Rise Trims Stablecoin Growth by 2.8 Points

15% Growth Trimmed by One Basis Point

A dollar parked in a savings account and a dollar held in a stablecoin compete for the same wallet, and the interest a bank pays appears to decide which way the balance tips. A working paper published on October 13 by the Bank for International Settlements (BIS), the Basel-based institution owned by central banks, examined weekly United States data from January 2019 through June 2025 and found that stablecoin growth slows measurably when banks raise deposit rates. The study, “Are Stablecoins and Bank Deposits Substitutes?”, was written by BIS economist Iñaki Aldasoro and Rashad Ahmed of the Andersen Institute for Finance and Economics, and the full working paper is posted on the BIS website. Both products work as stores of value and payment rails, the use case the industry often files under PayFi, but their returns differ: deposits can pay interest, while major payment stablecoins generally pay holders nothing. The arithmetic is straightforward: stablecoin market capitalization grew about 15% over a typical 10-week span in the sample, and the baseline estimate ties a one-basis-point rise in deposit rates (0.01 percentage point) to roughly 2.8 percentage points less cumulative growth over the following ten weeks, trimming that pace to about 12%. A second approach built to isolate cause and effect, an instrumental-variable model, puts the effect at 9.1 percentage points, close to three times the baseline. The authors identified the relationship through a quirk in bank behavior: lenders barely move savings rates while the federal funds rate sits below roughly 3%, then reprice much faster above it. Growth slows under either estimate; it does not reverse. The researchers controlled for the federal funds rate, Treasury yields, dollar movements, Bitcoin prices and stock market volatility, then repeated the exercise using certificate-of-deposit rates and stablecoins supplied to decentralized lending platforms, and the negative link held in both. Stress checks around the TerraUSD collapse, the FTX failure and the phaseout of Binance's BUSD left the estimate intact.

USDC Sensitive, USDT Less So

The paper draws its sharpest distinction between the two largest dollar-backed tokens. Over the ten-week window, the baseline estimates tied a one-basis-point deposit rate rise to a 4.8-percentage-point reduction in cumulative growth for Circle (CRCL)'s USDC, against 1.9 percentage points for Tether's USDT, a gap of about 2.5 times. The authors read the split as geography: USDC sits closer to United States institutional users and domestic financial markets, while USDT serves a larger international base whose choices depend on local banking arrangements and access to dollar assets. The findings arrive mid-argument in Washington. Banks have lobbied to keep stablecoin yield off the table, a dispute that hung over the Clarity Act's failed Senate vote, and groups such as the American Bankers Association and the Bank Policy Institute have pressed regulators to sequence their stablecoin consultations together. The GENIUS Act, signed by President Donald Trump in July of last year, takes effect in January and sets rules for issuance, use and custody; the OCC, the FDIC and the Treasury are still drafting the implementing regulations. The paper's authors argue regulators should weigh whether issuers may pay holders a deposit-style APY, alongside the trade-offs of requiring part of issuers' reserves to sit in bank deposits. Some banks are not waiting for that answer: Custodia Bank and Vantage Bank tested a dual-purpose token in June designed to work as a deposit inside the banking network and as a stablecoin outside it. Caveats bound the results. The dataset ends in June 2025, before the GENIUS Act took effect, and covers a single elevated-rate cycle in which payment stablecoins paid holders nothing. The paper states the authors' views, not an official BIS position, and it does not establish that stablecoin adoption has reduced total deposits or lending across the US banking system.

For issuers and their bank counterparts, the paper converts a lobbying argument into an observable lever. Our aggregate data shows the COINOTAG-tracked market at roughly $2.4 trillion, with Bitcoin holding 68.2% of that universe and the Fear & Greed Index neutral at 53/100, conditions in which rate expectations rather than sentiment tend to steer flows in the dollar-adjacent corner of the market. The mechanism runs through the federal funds rate: below about 3%, banks reprice deposits slowly and stablecoins grow freely; above it, every basis point of deposit yield pulls adoption down. Whichever way policy moves from here, the yield question regulators now face, whether issuers may pay holders returns, carries a measurable price tag. Readers weighing the macro side can start with our guide to how interest rates impact everything.