Higher deposit rates slow stablecoin growth
Stablecoins and bank deposits are partial substitutes, according to a Bank for International Settlements (BIS) paper published October 13, 2026. Weekly US data from January 2019 to June 2025 link higher deposit rates to slower stablecoin growth.
Deposit pricing changes token demand
The paper estimates reserve-backed stablecoin growth responses to deposit repricing using local projections.
Against average ten-week growth of 15 percent, ordinary least squares estimates imply roughly 3 percentage points less growth per basis point of repricing.
A one-standard-deviation move implies about 3.75 percentage points less growth.
Instrumental variable estimates are roughly three times larger.
To address two-way causality, the authors exploit nonlinear deposit-rate pass-through: banks reprice deposits more strongly when the federal funds rate exceeds approximately 3 percent.
Other money market rates track that rate roughly linearly.
Stablecoins offer payment and liquidity services like deposits but generally pay little or no interest.
USDC shows stronger substitution
Controls cover broader interest rates, Treasury yields, exchange rates, bitcoin prices, financial volatility and cryptocurrency-market developments.
The relationship is stronger for USDC than USDT, consistent with USDC's closer ties to US depositors.
It holds across deposit products and stablecoins supplied to decentralised finance protocols.
Differences in repricing across deposit tiers independently support substitution.
Non-stablecoin cryptoassets show no corresponding relationship, and instrumental variable estimates pass a placebo test using those assets.
Substitution is not deposit destruction
The evidence concerns asset allocation, not proof that stablecoin growth reduces aggregate bank deposits or lending.
Deposit pricing helps explain the sector's size.
The paper identifies potential effects on bank funding and monetary policy transmission if stablecoins gain wider use.
Source: Are stablecoins and bank deposits substitutes?
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