Banks campaigning to prevent stablecoins from draining their deposit base may already hold a simple but powerful competitive tool. A new working paper published by the Bank for International Settlements (BIS) finds that higher bank deposit rates predict slower stablecoin growth, suggesting traditional lenders can influence adoption through their own pricing decisions.
The findings add an empirical dimension to banks’ push to restrict stablecoin yield. Banks have argued that competition from digital dollars could erode the low-cost deposits that support lending. The research supports the existence of competition between the two channels, but suggests that banks have some capacity to defend their funding base.
Using weekly U.S. data from January 2019 through June 2025, BIS economist Iñaki Aldasoro and Rashad Ahmed of the Andersen Institute for Finance and Economics examined whether stablecoin holdings respond to changes in deposit returns.
Stablecoin market capitalization grew by an average of approximately 15% over a 10-week period in their sample. Their baseline estimate suggests that a one-basis-point increase in deposit interest rates, equivalent to 0.01 percentage point, reduced that growth by roughly three percentage points, to about 12%. A second method designed to isolate cause and effect produced an estimated reduction approximately three times larger, bringing stablecoin growth to about 6%.
Those results describe slower expansion, rather than a contraction in stablecoin supply. As noted by Decrypt, a one-basis-point increase is a sizable weekly change for savings rates, which typically move slowly.
The researchers sought to separate deposit pricing effects from broader financial conditions by controlling for Federal Reserve policy rates, Treasury rates, the dollar, bitcoin prices and market volatility. They also addressed a possible complication, in that banks might raise rates in response to stablecoin competition, making the direction of causation difficult to establish.
Their approach exploited banks’ tendency to reprice deposits more aggressively once the federal funds rate exceeds 3%. Below that level, deposit rates respond relatively little. The authors used this difference to help identify the effect of deposit returns on stablecoin demand.
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The relationship was stronger for Circle’s USDC than Tether’s USDT, consistent with USDC’s closer connections to U.S. institutional users. Differences in repricing across deposit tiers provided additional evidence that deposits and stablecoins compete. Tests also found that the method did not predict growth in cryptocurrencies other than stablecoins, helping distinguish the results from broader crypto market movements.
Banks therefore “retain some influence over the pace of [stablecoin] adoption through deposit pricing,” the paper concludes.
That conclusion bears directly on the policy fight over stablecoin returns. According to Decrypt, banks’ campaign to keep stablecoin yield off the table featured in the dispute surrounding the Clarity Act’s failed Senate vote. The debate also comes as federal agencies develop rules implementing the GENIUS Act’s stablecoin framework.
The authors say regulators should consider whether issuers may pay holders yield and the trade-offs involved in requiring issuers to maintain some reserves in bank deposits. Both choices could affect competition between digital dollars and traditional bank accounts.
The study does not establish the scale of any eventual deposit drain or resulting reduction in bank lending, however. The report emphasizes that stablecoins’ short history, limited geographic ownership data and relatively small size compared with the U.S. banking system make those effects difficult to measure directly.
Instead, the report identifies a mechanism through which competition could affect bank funding as adoption expands.
Other limitations matter for policymakers, Decrypt cautioned. The sample encompasses only one high-interest-rate cycle, during which stablecoins paid holders no direct interest. Results may differ if issuers can offer yield or market conditions change. The working paper also represents the authors’ views, rather than an official BIS position.
For banks, the findings suggest that preserving deposits involves commercial choices as well as regulatory advocacy. Stronger deposit returns can make stablecoins less attractive, but defending funding through higher rates carries its own cost.
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