When U.S. bank deposit rates rise 0.01 percentage points in a week, the 10-week growth of the stablecoin market cap (the total value issued) falls from an average of 15% to about 12%. That is the finding of a working paper (a research paper not yet formally published) the Bank for International Settlements (BIS, an international body whose members are central banks) released in October. For someone with $10,000 on deposit, 0.01 percentage points is a $1 difference in a year's interest.
Stablecoins (coins whose value is pegged to government money such as $1) are commonly seen as a place to park cash briefly when buying and selling crypto. They pay holders no interest, so they seem unrelated to bank rates. But the key point is elsewhere: stablecoins and bank deposits partly compete for the same money.
- Why do stablecoins resemble bank deposits?
The paper's authors, Rashad Ahmed (Anderson Institute for Financial Economics) and Iñaki Aldasoro (BIS), listed four things the two have in common. Their value is stable, they can be redeemed at any time, they are used or meant to be used for payments, and the issuer pays little or no interest.
Think of a paycheck account. It earns almost no interest, but people keep money there because they can pull it out right away. If people hold stablecoins for the same reason, some of that money may stay in the bank when the bank pays a little more interest. The difference is that a stablecoin is issued by a crypto company, not a bank.
- When deposit rates rose 0.01 percentage points, growth went from 15% to 12%
The researchers used weekly U.S. data from January 2019 to June 2025. Over that period, the market cap of stablecoins issued against reserves (USDT, USDC and others) grew from under $5 billion to more than $220 billion. They filtered out the influence of other factors such as the Bitcoin price, Treasury yields and the policy rate.
The result: when bank deposit rates rise 0.01 percentage points in a week, stablecoin market cap growth over the following 10 weeks falls from an average of 15% to about 12%. In this period U.S. deposit rates averaged 0.26% and were at most 0.57%. Put simply, even a small move in bank interest changed how fast stablecoins grew.
- Adjusted, the effect triples
The researchers judged that the simple calculation understates the effect. When money flows into stablecoins, banks may raise rates to keep deposits. Then rates and stablecoin growth rise together, which hides the effect. Weekly deposit rate data that cannot capture small changes precisely also shrinks the effect.
To filter this out, the researchers used one habit of banks. When the policy rate is below about 3%, banks barely raise deposit rates, but above that they raise them much more actively. Recalculating with that difference, the drop in growth tripled, from about 3 percentage points to about 9 percentage points, and 10-week growth fell from 15% to about 6%. This estimate is weighted toward high-rate periods, when the incentive to substitute is strongest, and the researchers also noted that the method is somewhat weak.
Both calculations mean that stablecoins did not shrink; they grew more slowly. Growth was not reversed.
- USDC, with many U.S. users, reacted more
Split by issuer, the difference is clear. When bank deposit rates rose 0.01 percentage points, 10-week growth fell by about 5 percentage points for Circle's USDC and about 2 percentage points for Tether's USDT (basic calculation). The researchers explained that USDC has many U.S. institutions and DeFi (financial services that run on code, without a bank) users, while USDT is used mostly abroad and in emerging markets.
Using the same method on the market cap of coins that are not stablecoins, they found no clear reaction. This suggests what responded to deposit rates was not the mood of the whole crypto market, but stablecoins that people held in place of deposits.
- So whether interest can be paid became the issue
In July 2025, the U.S. Congress passed the GENIUS Act (a stablecoin regulation law), which bars issuers from paying holders interest. The law is scheduled to take effect by Jan. 18, 2027 at the latest. In a March report, the Congressional Research Service (CRS) pointed out that the law does not explicitly block exchanges from paying rewards to holders. Citing a regulatory filing, the CRS said Circle passes part of the interest it earns on its reserves to Coinbase (the largest U.S. crypto exchange).
According to the same report, banks call this a loophole and want it closed, while the crypto industry counters that banks are trying to block competition. Bank of America CEO Brian Moynihan warned in this January's earnings call that up to $6 trillion in deposits could move to yield-paying stablecoins and related products. The researchers also named whether issuers can pay interest as the tool that sets the border between deposits and stablecoins.
- BITPRESS Insight
This paper shows that the size of the stablecoin market is not set by crypto heat alone. As the researchers put it, banks can influence how fast stablecoins spread through their deposit rates. But as CoinDesk pointed out, if banks pay more interest, their own costs rise by the same amount.
The interest rules sit on the same scale. If issuers or exchanges can pay holders a return, stablecoins can compete better with deposits; if that is blocked, banks gain the edge. But these results rest on a single period of rising rates, 2022 to 2025, and could change if more stablecoins pay interest.
If stablecoin growth has slowed, don't read it only as a sign that crypto heat has cooled. If bank deposit interest has risen, money that was weighing deposits against stablecoins may simply have stayed in the bank.
Sources
https://www.bis.org/publications/working-paper-1382-are-stablecoins-and-bank-deposits-substitutes.pdf
https://www.coindesk.com/business/2026/10/14/banks-could-slow-stablecoin-growth-by-paying-savers-more-bis-paper-finds
https://www.everycrsreport.com/reports/IF13174.html
https://www.theblock.co/post/385724/bank-of-america-ceo-stablecoin-yields
https://www.lw.com/en/insights/OCC-Issues-Proposal-to-Implement-the-GENIUS-Act
Glossary
Stablecoin — coins built to keep their value pegged to government money such as $1; USDT and USDC are the best-known examples.
Bank for International Settlements (BIS) — an international body whose members are central banks, which publishes research on financial stability.
DeFi — financial services that run on code on a blockchain, without an intermediary such as a bank.
GENIUS Act — a stablecoin regulation law the U.S. Congress passed in July 2025, which bars issuers from paying holders interest.
Reserves — assets such as Treasury bonds and cash that a stablecoin issuer sets aside to be able to pay holders back.
BITPRESS articles are information to help your investment decisions, not a recommendation to buy or sell any stock or coin. Investment decisions and their results are your own responsibility.
