Banks' Best Stablecoin Defense? A Good Old-Fashioned Rate Hike 🏦

A one-basis-point increase in bank deposit rates is enough to noticeably slow stablecoin growth, according to a working paper from the Bank for International Settlements that puts a number on a lever lenders have long suspected they still hold. In a typical 10-week window using weekly U.S. data from January 2019 through June 2025, stablecoin market capitalization grew roughly 15%, the researchers found. Raise savings rates by a single basis point and that 10-week growth falls to about 12% under a baseline estimate, and to roughly 6% under a second method designed to isolate cause and effect. Stablecoins kept expanding in both scenarios — just more slowly.

The paper's authors, BIS economist Iñaki Aldasoro and Rashad Ahmed of the Andersen Institute for Finance and Economics, built their causal argument on an asymmetry in U.S. bank behavior. Lenders barely adjust savings rates until the federal funds rate climbs past roughly 3%, after which they begin repricing meaningfully faster. By exploiting that kink, the authors argue they can separate correlation from causation. The link between higher deposit rates and slower stablecoin growth was stronger for Circle's USDC than for Tether's USDT, which the authors attribute to USDC's closer ties to U.S. users.

The authors' conclusion is that banks "retain some influence over the pace of that adoption through deposit pricing." Working papers reflect the views of their authors, not necessarily those of the BIS, and the sample has clear limits: it covers a single high-rate cycle during which stablecoins paid holders no yield. The paper urges regulators to weigh whether issuers should be allowed to pay yield, and to consider the trade-offs of requiring issuers to hold part of their reserves as bank deposits.

That policy fight is already underway in Washington. Banks have lobbied to keep stablecoin yield off the table, a dispute that hung over the Clarity Act's failed Senate vote. The OCC, FDIC and Treasury are now writing rules to implement the GENIUS Act, which takes effect in January and was signed into law by President Donald Trump in July of last year, effectively legalizing stablecoins in the United States and setting rules for their issuance, use and custody. The BIS has tracked stablecoins closely for years, arguing in 2021 that the rise of blockchain-based digital dollars made central bank digital currencies more urgent, and warning in a 2023 survey that stablecoins could pose risks to financial stability if widely adopted.