BIS paper finds higher bank deposit rates slow stablecoin market growth

A new Bank for International Settlements working paper analyzing U.S. data from 2019 to 2025 found that higher bank deposit rates predict slower stablecoin market growth. Using weekly data, a one-basis-point increase in deposit rates reduced stablecoin growth from a typical 15% over 10 weeks to roughly 12% under the baseline estimate, and to about 6% under a method isolating cause and effect. The effect was stronger for Circle's USDC than Tether's USDT, which the authors attributed to USDC's closer ties to U.S. users. The authors recommend regulators consider whether stablecoin issuers can pay yield to holders and the trade-offs of requiring reserves held in bank deposits.