BIS Study Reveals Impact of Bank Rates on Stablecoin Growth

A recent study by the Bank for International Settlements (BIS) indicates that higher deposit rates offered by banks can significantly slow the growth of stablecoins, particularly USDC. The working paper, titled "Are stablecoins and bank deposits substitutes?" and published on October 13, 2026, suggests that both financial products compete for the same pool of funds, with banks potentially using interest rates as a tool to influence stablecoin demand.

The research, conducted by Rashad Ahmed and Iñaki Aldasoro, analyzed weekly data from the United States spanning from January 2019 to June 2025. During this period, the stablecoin market capitalization surged from under $5 billion to over $220 billion. The findings reveal that a 1 basis point increase in bank deposit rates correlates with a decrease of approximately 3 percentage points in stablecoin market cap growth over a 10-week period. This effect is even more pronounced for USDC, which experienced a decline of about 4.8 percentage points for each basis point increase, compared to a 1.9 percentage point decrease for USDT.

The study also highlights a nonlinear relationship that emerges when the federal funds rate exceeds approximately 3%. In low-rate environments, both bank deposits and stablecoins yield minimal returns, but as rates rise, the appeal of interest-bearing deposits becomes more pronounced. This research underscores the structural vulnerability of stablecoins, which do not provide yields to holders, and suggests that stablecoin adoption may be closely tied to the interest rates offered by banks. The implications of these findings extend to policymakers, as they may need to consider the competitive dynamics between stablecoins and traditional banking in future regulatory frameworks.

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Source: KLEA News