A Banque de France working paper published on November 9 found that Aave stablecoin yields can fall immediately after an unexpected Federal Reserve tightening, Coindoo reported. The study tracks deposits of USDC, USDT and DAI on the lending protocol from January 2021 to January 2026.
The finding matters because, as Genfinity reported, a growing share of dollar savings earns rates that the Fed influences only indirectly. Genfinity also reported that centralized exchanges increasingly use protocols including Aave and Morpho to offer yield on customer balances.
The paper is by Andrea Barbon, Jean Barthélemy and Benoît Nguyen, according to Coindoo. The outlet reported that the authors link the initial rate decline to leveraged borrowers repaying faster than suppliers withdraw, reducing the share of deposits being borrowed.
Aave rates during Fed moves
The rate history examined in the paper includes periods when Aave stablecoin yields moved in the opposite direction from Fed policy. Between March 2022 and July 2023, the Fed raised rates by a combined 525 basis points, while the average Aave deposit rate fell and then returned to its starting point.
The average Aave rate dropped from 2.5% to 0.5% by September 2022. It had recovered to 2.5% by July 2023, even as the Fed's increases over the period totaled 525 basis points.
A different divergence appeared in late 2024. From September through December, the Fed cut rates by 100 basis points, while Aave rates rose from about 3% to 9%.
The longer sample also contained periods when DeFi rates were above and below the Fed funds rate. Coindoo reported that the gap averaged roughly 100 basis points above the Fed rate across the sample, but DeFi rates were about 160 basis points below it from mid-2022 through the end of 2023.
How Aave stablecoin yields are set
According to Coindoo, suppliers deposit stablecoins into Aave pools, and borrowers draw from those pools against crypto collateral. The proportion of deposited tokens borrowed is the utilization rate, a measure that helps determine what lenders earn.
Coindoo reported that Aave's rate model raises the cost of borrowing as utilization increases, with the rate rising more steeply beyond a threshold. After a reserve factor is retained for the protocol, the remaining interest goes to suppliers, according to the outlet.
For USDC, the paper lists parameters as of March 2025 under which the borrowing rate rose from zero to 4% at 92% utilization, Coindoo reported. Above that threshold, the listed slope was steeper by 10 percentage points, and the reserve factor was 10%.
The model makes the relative movement of borrowing and supply important. Coindoo reported that when borrowing shrinks while supply stays in place, utilization and the supplier rate fall; if both sides shrink at the same pace, utilization and the rate do not change.
Testing policy surprises
The paper's main test focuses on monetary-policy surprises rather than every Fed rate decision, according to Coindoo. The outlet reported that the authors measured surprises using interest-rate futures in the half hour around Federal Open Market Committee announcements. The authors then standardized each surprise to correspond to an increase of 25 basis points in the yield on two-year Treasury securities, the outlet reported.
Both total borrowing and total supply reached declines of around 10% four to five months after a shock of that size. Borrowing fell more quickly at the outset, and Aave stablecoin yields dropped immediately across all three assets, Coindoo reported.
Coindoo reported that the estimated effect subsequently moved toward a slightly positive level that the authors could not statistically distinguish from zero. Because the test concerns surprises, the outlet said the result should not be treated as establishing the same effect for a widely expected hike.
Coindoo reported that Aave borrowers are predominantly leveraged long on crypto and that Bitcoin fell substantially and persistently after a tightening shock in the paper's sample. Genfinity likewise reported that traders tend to reduce leverage when the Fed tightens and Bitcoin falls.
Long-run rates and lending scale
The paper does not conclude that Aave stablecoin yields and traditional rates remain apart indefinitely. Genfinity reported that the authors' statistical tests found deposit rates move toward risk-free rates over the long run, although the leverage channel can delay that convergence after a policy surprise.
Coindoo reported that, in the authors' calculations, a shock affecting the difference between SOFR and Aave deposit rates took about five weeks to halve for DAI, four weeks for USDC and just over two weeks for USDT. Those figures describe how quickly a shock to the gap diminished, rather than the size of a deposit yield.
Genfinity reported that the authors also identified a shortage of large, active arbitrageurs connecting DeFi and traditional markets. According to the outlet, the paper said that gaps consequently last longer than they would in a conventional money market.
The study comes as Aave deposits have exceeded $50 billion since August 2025, according to Genfinity, which reported that the paper compares that scale with small U.S. deposit-taking banks. Genfinity also reported that Banque de France working papers do not represent the official views of the bank or the Eurosystem.
Conclusion
The working paper documents cases in which Aave deposit rates moved against Fed policy, including a decline during the 2022 tightening cycle and a rise during the 2024 cuts. Its test of unexpected tightening found that borrowing initially fell faster than supply, lowering rates on the three stablecoins studied, Coindoo reported. The subsequent stage of the authors' analysis follows the effect over the year: according to Coindoo, it moved toward a slightly positive level that could not be statistically distinguished from zero. The reported findings concern policy surprises and should not be assumed to apply in the same way to an expected hike.
Frequently Asked Questions
What did the Banque de France paper find about Aave stablecoin yields?
The paper found that Aave deposit rates can fall immediately after unexpected Fed tightening, according to Coindoo. The outlet reported that leveraged borrowers repay faster than suppliers withdraw, reducing utilization and the rate paid to stablecoin lenders. The study covers USDC, USDT and DAI from January 2021 to January 2026.
How did Aave deposit rates change during the Fed's 2022 tightening cycle?
The average Aave deposit rate fell from 2.5% to 0.5% by September 2022, then recovered to 2.5% by July 2023. Between March 2022 and July 2023, the Fed raised rates by a combined 525 basis points.
Why can an unexpected Fed hike lower Aave lending rates?
Coindoo reported that an unexpected tightening can prompt leveraged borrowers to repay faster than stablecoin suppliers withdraw. That lowers utilization, the share of deposits borrowed, and can reduce the rate suppliers earn. Aave's model raises borrowing costs as utilization rises and increases them more steeply beyond a threshold, according to the outlet.
Who wrote the November 9 Banque de France working paper?
Andrea Barbon, Jean Barthélemy and Benoît Nguyen wrote the paper, according to Coindoo, which reported that it was published on November 9. Coindoo also reported that the paper expresses the authors' views rather than those of the Banque de France. Genfinity said working papers do not reflect the official view of the bank or the Eurosystem.
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