A Bank for International Settlements working paper by economists Iñaki Aldasoro and Rashad Ahmed reveals that higher U.S. bank deposit rates significantly slow stablecoin market capitalization growth. Examining data from 2019 to 2025, the study shows a one-basis-point rise in deposit rates trims average 10-week stablecoin growth from 15% to 12%. Circle's USDC proved more sensitive than Tether's USDT due to its tighter ties to U.S. institutional markets, fueling ongoing Washington regulatory debates over GENIUS Act yield prohibitions.
Impact of deposit rates on stablecoin growth
- ▪Under an instrumental-variable method, a one-basis-point increase in U.S. bank deposit rates reduced cumulative 10-week stablecoin market growth to 6%.
- ▪Under the baseline statistical model in an October 13, 2026 Bank for International Settlements paper by Iñaki Aldasoro and Rashad Ahmed, a one-basis-point increase in U.S. bank deposit rates reduced average 10-week stablecoin market growth from 15% to 12%.
- ▪Higher U.S. bank deposit rates slowed stablecoin growth without reducing total existing stablecoin supply or turning market growth negative.
Substitution between stablecoins and bank deposits
- ▪The Bank for International Settlements working paper described reserve-backed stablecoins and bank deposits as partial substitutes because non-yielding stablecoins become less attractive as bank deposit yields rise.
- ▪Similar substitution patterns appeared when replacing ordinary deposit rates with certificate of deposit rates, and when testing stablecoins supplied to decentralized finance lending platforms.
Impact on bank deposits
- ▪The study noted that aggregate market data cannot prove that stablecoin growth reduced total U.S. bank deposits or overall bank lending.
- ▪The study noted that because stablecoin issuers reinvest funds, moving money into stablecoins could shift deposits between individual banks rather than shrink total deposit volume.
Study scope and methodology
- ▪When estimating the statistical relationship, the BIS study's authors controlled for federal funds rates, U.S. Treasury yields, dollar movements, Bitcoin prices, and stock market volatility.
- ▪The Bank for International Settlements study analyzed 339 weeks of U.S. data from January 2019 through June 2025, during which reserve-backed stablecoin market capitalization grew from under $5 billion to over $220 billion.
Instrumental-variable methodology and validation
- ▪The study's instrumental-variable model yielded a first-stage F-statistic of 9.78, which falls just below the standard benchmark of 10 for statistical instrument strength.
- ▪The study's instrumental-variable method relied on U.S. banks passing through significantly larger shares of federal funds rate increases to deposit rates once the federal funds rate exceeded 3%.
- ▪The instrumental-variable method did not predict changes in non-stablecoin cryptocurrency market capitalizations, ruling out a broad cryptocurrency market cycle.
Differential impact on USDC versus USDT
- ▪Circle's USDC cumulative 10-week market capitalization growth fell by 4.8 percentage points per basis point rise in bank deposit rates, compared to 1.9 percentage points for Tether's USDT.
- ▪Economists Iñaki Aldasoro and Rashad Ahmed attributed USDC's higher sensitivity to deposit rates to its closer connections to U.S. institutional users and domestic financial markets relative to USDT's offshore focus.
Policy recommendations for stablecoin regulation
- ▪The authors suggested regulators evaluate requiring stablecoin issuers to hold part of their reserves as bank deposits, noting it could support bank funding but concentrate uninsured deposits in few banks.
- ▪Economists Iñaki Aldasoro and Rashad Ahmed recommended regulators weigh whether stablecoin issuers should be permitted to pay interest yields to holders.
U.S. legal and regulatory yield restrictions
- ▪The GENIUS Act, signed into law by President Donald Trump in July 2025, bars stablecoin issuers from paying interest directly to holders and takes effect in January.
- ▪In September 2026, the Federal Reserve proposed rules treating stablecoin yield routed through an issuer's affiliates or connected third parties as presumptively prohibited.
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