Deposit Rates Slow Stablecoin Growth, a BIS Paper Finds
A BIS working paper finds stablecoin growth slows after banks raise deposit rates. The effect is real but partial, and it comes at a funding cost.
Higher bank deposit rates are followed by slower stablecoin growth, but only partly, according to BIS Working Paper 1382. The BIS authors find stablecoins and bank deposits are partial substitutes, with USDC more rate-sensitive than USDT. Banks can slow outflows by paying savers more, at the cost of higher funding costs.
The Ledger Desk · 3 min read- BIS Working Paper 1382 finds that stablecoin market-cap growth slows after banks raise deposit rates, so the two products are partial substitutes.
- As reported by CoinDesk, the effect was stronger for USDC than for USDT, which the authors link to USDC's closer ties to US users.
- Defending deposits by paying more raises funding costs, so the cost falls on bank margins.
- The paper covers one high-rate period and does not establish actual deposit or lending losses, so it should be read as a mechanism, not a forecast.
- Stablecoin reserves can return to banks as issuer deposits, so system-wide funding can look stable while its composition shifts.
A new Bank for International Settlements paper gives banks a concrete lever against stablecoins: price deposits higher. BIS Working Paper 1382 finds that stablecoin growth slows after banks raise deposit rates. The finding is narrower than the headline suggests. Growth slowed rather than reversed, the sample covers one high-rate period, and the lever has a price, which is a higher cost of funds for the bank that pulls it.
What the paper measures
The paper, by Rashad Ahmed and Iñaki Aldasoro and dated 13 October 2026, asks whether stablecoins and bank deposits are substitutes. Its evidence is that higher deposit rates are followed by slower stablecoin growth, which the authors read as partial substitution. As reported by CoinDesk, the data are weekly, running from January 2019 to June 2025. The unit measured is stablecoin market-cap growth, not deposit outflows at any individual bank.
Why the issuer matters
The relationship is stronger for USDC than for USDT. CoinDesk reports that the authors tie this to USDC's closer links to US users, who are the savers exposed to US bank deposit rates. The practical reading is that deposit pricing works where the stablecoin's holders are also the bank's potential depositors. A coin held mainly outside that customer base responds less, which limits how much any one bank's pricing can do.
The funding-cost trade-off
Defending deposits by paying more is not free. A related BIS paper, Working Paper 1363, describes a bank lending channel in which stablecoin demand pushes up deposit rates, raises bank funding costs and reduces loan supply. The two papers fit together: the competitive response to stablecoins is a margin squeeze, and the pressure lands on lending capacity as well as on profit.
Reserves can return to the banking system
Stablecoin growth does not automatically drain bank funding. As reported by CoinDesk, issuer reserves can flow back to banks as issuer deposits, so total deposits can hold steady while their composition changes. That matters for risk: a deposit from a stablecoin issuer can behave differently from a retail deposit, and the paper does not establish that deposits or lending actually fell.
What this means for bank treasuries and compliance teams
The takeaway for bank treasurers is to model stablecoin outflows as a function of the spread between deposit rates and alternatives, and to price the defence against its funding cost. The authors flag limits that argue for caution: one high-rate period, and yield-bearing stablecoins and tokenized money market funds, which could weaken the rate lever. Watch whether later BIS work tests those products and whether issuer-deposit concentration draws supervisory attention.
- Can banks slow stablecoin growth by paying savers more?
- Partly. BIS Working Paper 1382 reports that stablecoin growth slows after banks raise deposit rates. The authors treat stablecoins and bank deposits as partial, not perfect, substitutes, and growth slowed rather than reversed.
- Does the BIS paper show that banks are losing deposits to stablecoins?
- No. As reported by CoinDesk, the paper does not establish actual losses of deposits or lending. It measures how stablecoin market-cap growth responds to deposit pricing, and it covers a single high-rate period.
- Why does the stablecoin issuer matter in the results?
- The paper finds the relationship is stronger for USDC than for USDT. The authors link this to USDC's closer ties to US users, who are more exposed to US bank deposit rates.
- Banks could slow stablecoin growth by paying savers more, BIS paper finds — CoinDesk
- Are stablecoins and bank deposits substitutes? (BIS Working Paper 1382) — Bank for International Settlements
- The macroeconomics of stablecoins (BIS Working Paper 1363) — Bank for International Settlements