Key Notes
- BIS-published research finds that higher bank deposit rates are followed by slower growth in reserve-backed stablecoins.
- The relationship is stronger for USDC than USDT, consistent with closer ties to US depositors.
- The findings concern partial substitution and do not establish that stablecoins have reduced aggregate bank deposits or lending.
Stablecoins compete with bank deposits for users’ money, according to research published by the Bank for International Settlements. The study finds that when banks offer higher deposit rates, growth in reserve-backed stablecoins tends to slow.
The findings suggest banks retain a way to influence stablecoin adoption: paying depositors more. They also point to a potential funding challenge if digital dollars become a more widely used alternative for holding and moving money.
Published on October 13, the BIS working paper by Rashad Ahmed and Iñaki Aldasoro examines partial substitution between the two assets. It is the authors’ research, rather than an official policy position of the BIS or its member central banks.
Deposit Rates Matter More for USDC
The analysis uses weekly US data from January 2019 through June 2025. Higher deposit rates were followed by slower stablecoin growth, with a stronger relationship for Circle’s USDC than Tether’s USDT.
The authors interpret that difference as consistent with USDC’s closer links to US users. They control for policy rates, Treasury yields, the dollar, Bitcoin prices and financial volatility, and find no equivalent effect for non-stablecoin cryptoassets.
The BIS research summary describes the result as evidence of partial substitution. The study concerns how users allocate funds between assets; it does not establish that stablecoin growth necessarily reduces aggregate bank deposits or lending.
A Change in Who Holds the Deposit
That distinction matters because money paid to a stablecoin issuer is reinvested. It can move between institutions or depositor categories rather than disappear from the banking system. The research cannot identify which individual holders switch assets or which banks lose funding.
The sample also contains only one high-interest-rate episode. Its findings concern a period dominated by stablecoins that do not themselves pay interest; yield-bearing tokens could change the competitive relationship.
Circle’s reserve disclosures show why the backing structure matters. The company says most USDC reserves sit in the Circle Reserve Fund, which can hold cash, short-dated US Treasuries and overnight Treasury repurchase agreements. The remainder is held in cash at banks.
A customer holding USDC therefore owns a different instrument from a personal bank balance, while the issuer remains connected to banks and money markets. Counting every dollar of stablecoin issuance as a dollar permanently removed from bank deposits would miss those connections.
Banks Are Becoming Participants, Too
Recent developments show the relationship extending beyond competition. Japan’s MUFG Bank, Mizuho Bank and Sumitomo Mitsui Banking Corporation have completed a joint cross-border stablecoin trial, covered in CoinScreamer’s pilot report.
That project’s envisaged structure uses bank deposits as backing and remains a test ahead of commercial deployment. It illustrates a model in which banks help build the token-based payment system themselves.
Elsewhere, our Visa Direct coverage explains how eligible businesses can use USDC to fund payouts through Inyo Global. Recipients can still receive conventional currency; using a stablecoin for business funding does not require every recipient to adopt a crypto wallet.
The BIS study adds an interest-rate dimension to those payment developments. Its evidence points to competition for balances, while the broader banking impact will depend on adoption, reserve investment and the terms banks offer their customers.
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