Brief
A new working paper by the Bank for International Settlements (BIS) using data from the United States from 2019 to 2025 finds that the higher the bank deposit interest rates, the slower the growth of the stablecoin market.
The author states that this impact is stronger on USDC of Circle than on USDT of Tether, and the reason is more closely related to the closer connection with USDC and American users.
The author states that regulatory authorities should weigh whether issuers should be able to pay returns to holders. The views expressed in the paper reflect the author's opinion and do not necessarily represent the stance of BIS.
Banks that are worried about customers being diverted to stablecoins may already have a countermeasure: interest rates on savings accounts.
This is the conclusion drawn from the latest working paper by BIS. BIS is a bank located in Basel that serves central banks around the world. Economists from aki, Aldasoro, Andersen Institute, for, Finance, and, Economics, and Rashad Ahmed analyzed weekly US data from January 2019 to June 2025 and found that when banks raise deposit interest rates, the growth of stablecoins slows down.
In the study sample, the market value of stablecoins increased by about 15% over a typical 10-week period. The authors' benchmark estimates show that for every 1 basis point increase in deposit interest rates – which is already a considerable weekly change for slowly fluctuating savings rates – this growth rate drops to around 12%. Under another method aimed at distinguishing causality, the growth rate decreases to about 6%. Stablecoins are still growing, but at a slower pace.
To distinguish between cause and coincidence, the author took advantage of a characteristic of bank behavior. Lending institutions hardly raise savings interest rates before the federal funds rate rises to around 3%; once it exceeds this level, the speed of repricing becomes much faster.
This association between Circle and USDC is stronger than that between Tether and USDT. The author attributes this to the closer connection of USDC with American users. The conclusion drawn from the paper is that banks 'can still influence this adoption rate to some extent through deposit pricing.'
These findings are also accompanied by certain limitations. The working paper reflects the views of the authors and do not necessarily represent the stance of BIS. Moreover, the sample covers a single period of high interest rates during which stablecoins did not pay interest to their holders.
The author states that regulatory authorities should weigh whether stablecoin issuers should be allowed to pay yields to holders, as well as the pros and cons of requiring issuers to deposit a portion of their reserves in bank accounts.
This debate continues in Washington. Banks have been lobbying against including the returns of stablecoins in the consideration, and this controversy overshadowed the failed vote of the Clarity Act in the Senate. Meanwhile, OCC, FDIC, and the Treasury Department are formulating rules to implement the GENIUS Act. The bill will take effect in January. Last July, then-U.S. President Donald Trump signed the bill, essentially legalizing stablecoins in the United States and establishing rules for their issuance, use, and custody.
BIS has long been paying attention to stablecoins and the broader field of cryptocurrencies. In 2021, BIS believed that the rise of blockchain-based digital dollars made the necessity of central bank digital currencies even more urgent; a BIS survey in 2023 warned that if widely adopted, stablecoins could threaten financial stability.
