A 0.01 percentage point increase in bank deposit rates predicts a slowdown in stablecoin growth. This finding comes from a Bank for International Settlements (BIS) working paper that examined the link between banking interest rates and stablecoin growth using weekly data from January 2019 to June 2025.
The measurable effect is substantial: a one-basis-point increase in average deposit rates cuts stablecoin market cap growth over a 10-week period from roughly 15% to 12%. When accounting for banks responding by raising rates to compete with stablecoins, the authors’ preferred estimate indicates an impact three times larger, suppressing growth down to around 6%.
The WatcherGuru account on X cited the BIS conclusion that crypto stablecoins compete directly with traditional bank deposits. The authors of the BIS paper emphasized that banks maintain influence over the pace of adoption through deposit pricing.
Why USDC Is More Sensitive Than USDT
BIS research found that Circle’s USDC is far more sensitive to deposit interest rates than Tether’s USDT.
This difference in sensitivity is consistent with USDC’s proximity to United States users. Investors in the US have direct access to regulated yield-bearing savings products. When banks raise interest rates, the incentive to hold non-yielding digital dollars drops drastically. In contrast, USDT circulates predominantly outside US jurisdiction and in cross-border trade across emerging markets that do not rely on domestic savings markets.
$6 Trillion Shift in Funds and Liquidity Pressure
Banking industry concerns over deposit flight are not unfounded. Bank of America CEO Brian Moynihan previously warned of the potential for up to $6 trillion in deposits to migrate to stablecoins and similar yield-bearing products.
A Federal Reserve staff analysis in December detailed the mechanics of this fund rotation. Customer money flowing into stablecoins can return to banks as deposits held by token issuers. Total bank deposits may remain unchanged, but the party supplying bank funding shifts from individual retail depositors to token issuers.
These larger, uninsured deposit balances bring operational consequences. Banks are required to maintain more liquid assets to prepare for potential withdrawals, which narrows the room for long-term lending.
For stablecoin holders, the BIS research reveals the true competitive lever: banks do not need to ban crypto assets to preserve liquidity, but simply need to offer more competitive deposit yields to savers.
Sourced from CoinDesk.
Also read: What Is DeFi (Decentralized Finance)?
Also read: Wells Fargo Manages $1.9 Trillion in Assets - CEO Now Prepares Bank to Enter Stablecoin Market
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
