BIS Paper Finds Banks Can Slow Stablecoin Adoption by Raising Deposit Rates

Banks may already hold a counterweight against stablecoins such as USDT and USDC: the interest paid on an ordinary savings account. That is the conclusion of a working paper released by the Bank for International Settlements on October 13, 2026, titled "Are stablecoins and bank deposits substitutes?" and issued as BIS Working Paper 1382 by Rashad Ahmed and Iñaki Aldasoro, according to Crypto Briefing.

The finding matters because it reframes the contest between banks and stablecoins as a pricing problem rather than a technology race. Reserve-backed stablecoins function as partial stand-ins for conventional deposits, the paper concludes, meaning the two products compete for the same pool of money, and that deposit pricing gives banks a degree of control over how quickly stablecoins spread.

What the Stablecoin Adoption Data Shows

The study drew on weekly U.S. figures covering January 2019 to June 2025. Aldasoro, a BIS economist, and Ahmed, of the Andersen Institute for Finance and Economics, determined that stablecoin expansion decelerates whenever banks lift what they pay depositors. That window covers a dramatic stretch for the sector, with stablecoin market capitalization climbing from less than $5 billion to more than $220 billion, Crypto Briefing reported.

Across the sample, stablecoin market cap grew roughly 15% over a typical 10-week stretch, the baseline against which the rest of the findings should be read. The central estimate shows that a single basis point added to deposit rates corresponds to about 3 percentage points shaved off stablecoin market cap growth across a 10-week span. A basis point is one hundredth of a percentage point, and the 3 percentage point figure comes from the authors' ordinary least squares estimates, Crypto Briefing reported.

Using instrumental variables estimates instead, the measured effect rises to about 9 percentage points. Decrypt and kucoin framed the same result in growth terms: a one-basis-point rise in deposit rates, sizable for savings rates that typically move slowly, trimmed average ten-week growth from about 15% to roughly 12% under the baseline estimate, and to about 6% under a second method designed to isolate cause and effect. In both cases, growth slowed but did not reverse, CryptoNews reported.

USDC More Exposed Than USDT

USDC absorbed the heavier blow, losing roughly 4.8 percentage points of growth for every basis point added to deposit rates, according to Crypto Briefing. USDT, by comparison, showed a reaction of 1.9 percentage points.

The authors attributed the difference to USDC's closer ties to U.S. users, a pattern they said was consistent with Circle's USDC being more integrated with the domestic banking system. The relationship was stronger for Circle's USDC than Tether's USDT, Decrypt and CryptoNews reported.

The pattern extended beyond tokens sitting in wallets. Stablecoins supplied to decentralized finance protocols showed the same sensitivity, while non-stablecoin crypto assets displayed no comparable response, with bank deposit rates having no significant effect on them, Crypto Briefing reported.

The 3% Threshold and the Rate Environment

The wider interest-rate backdrop adds another layer to the results. Above a federal funds rate of roughly 3%, the authors identified a nonlinear effect, Crypto Briefing reported. Savings rates barely move until the policy rate crosses about 3%, after which banks reprice them far more quickly, according to Decrypt and kucoin.

Near-zero rates leave depositors and stablecoin holders earning essentially the same thing: nothing. As rates climb, the spread between a yield-bearing deposit and a token that pays nothing grows too wide to dismiss, Crypto Briefing reported. The authors used that pattern in bank behavior to distinguish causation from coincidence, according to kucoin.

The sample stretches from the era of rock-bottom rates through the subsequent tightening cycle, a stretch during which the stablecoin sector expanded more than fortyfold. The research summary describes the mechanism as a pricing channel through which the banking industry can influence stablecoin demand, Crypto Briefing reported.

GENIUS Act Limits Issuer Response

The dynamic is now being codified into law. President Donald Trump signed the GENIUS Act in July of last year, a measure that effectively made stablecoins legal in the United States and laid down rules governing how they are issued, used and held in custody, according to Decrypt and kucoin.

The law includes a specific provision in Section 4(a)(11) stating that no permitted payment stablecoin issuer or foreign payment stablecoin issuer shall pay holders any form of interest or yield solely in connection with holding, using, or retaining a payment stablecoin, Forkast News reported. The rules take effect January 18, 2027, leaving issuers unable to match bank deposit rates head-on.

The prohibition applies only to the issuers themselves. Crypto exchanges and third-party platforms remain free to pay interest on stablecoins held on their platforms, creating a bifurcated market where the yield is decoupled from the underlying asset's issuance, Forkast News reported. Meanwhile, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Treasury are writing rules to implement the GENIUS Act, according to kucoin.

Limits of the Research and What Comes Next

The BIS authors are explicit about the limits of what they can claim: the work does not establish losses of deposits or lending, and its sample covers a single high-rate episode, so the findings describe one rate cycle rather than a law of the market, according to CryptoNews and Forex Crunch. Working papers reflect the authors' views, not necessarily the BIS's, and the sample spans a single high-rate cycle in which stablecoins paid holders no interest, Decrypt and kucoin reported.

The authors said regulators should weigh whether stablecoin issuers may pay holders yield, along with the trade-offs of requiring issuers to keep part of their reserves in bank deposits, according to Decrypt and kucoin. Banks have lobbied to prohibit stablecoin yield, and the dispute was prominent during the Clarity Act's failed Senate vote, kucoin reported.

The scale of the potential substitution has been flagged before. Bank of America CEO Brian Moynihan warned in January that as much as $6 trillion in deposits could move into stablecoins and related products offering returns, potentially reducing lending capacity and raising borrowing costs, according to CryptoNews and Forex Crunch. A December Federal Reserve staff analysis explained that money placed in stablecoins can return to banks as issuer deposits, changing who supplies banks' funding even when total deposits remain unchanged, CryptoNews reported.

For policymakers, the research summary notes that stablecoin adoption may be closely linked to the interest rates banks offer savers, and that the relationship carries implications for both monetary policy and regulation, Crypto Briefing reported. The next datapoint is the deposit-rate response: how quickly banks in major markets reprice savings products as policy rates shift, and whether stablecoin issuer yields widen or narrow the gap, according to Forex Crunch.

Conclusion

The established finding is narrow but pointed: higher bank deposit rates predict slower stablecoin market growth, the effect is stronger for USDC than USDT, and banks retain influence over adoption through deposit pricing. The paper does not show that stablecoins have reduced bank deposits or lending, and its sample covers one high-rate cycle. The next concrete steps are regulatory: the OCC, FDIC and Treasury are writing rules to implement the GENIUS Act ahead of its January 18, 2027 effective date, while the authors say regulators should weigh whether issuers may pay yield and the trade-offs of requiring reserves to sit in bank deposits.

Frequently Asked Questions

What did BIS Working Paper 1382 find about stablecoins and bank deposits?

The paper, published October 13, 2026 by Rashad Ahmed and Iñaki Aldasoro, found that stablecoins and bank deposits behave as partial substitutes. A 1 basis point rise in U.S. deposit rates lined up with roughly 3 percentage points less stablecoin market cap growth over 10 weeks, and about 9 points under instrumental variables estimates.

Why is USDC more sensitive to deposit rate increases than USDT?

USDC lost about 4.8 percentage points of growth per basis point of deposit repricing, versus 1.9 points for USDT. The authors attributed the gap to USDC's closer ties to U.S. users and institutions, suggesting the more integrated a stablecoin is with the domestic banking system, the more sensitive it is to that system's yields.

How does the GENIUS Act affect stablecoin issuers' ability to compete with banks?

Section 4(a)(11) of the GENIUS Act, signed in July 2025 and effective January 18, 2027, bars permitted payment stablecoin issuers from paying holders any interest or yield for holding their tokens. Exchanges and third-party platforms remain free to pay interest on stablecoins held on their platforms.

Does the BIS paper prove stablecoins drain bank deposits or lending?

No. The authors state the work does not establish losses of deposits or lending, only a correlation in growth patterns. The sample covers a single high-rate episode between 2019 and 2025 in which stablecoins paid holders no interest, so the findings describe one rate cycle rather than a permanent law.

What did Bank of America CEO Brian Moynihan warn about stablecoins?

Moynihan warned in January that as much as $6 trillion in deposits could move into stablecoins and related products offering returns, potentially reducing banks' lending capacity and raising borrowing costs. The BIS paper suggests that outcome is not fixed if banks reprice deposits competitively.