Banks Could Slow Stablecoin Growth by Paying Savers More, BIS Paper Finds

A Bank for International Settlements working paper found a single basis point rise in U.S. bank deposit rates predicted measurably slower stablecoin growth, cutting ten-week expansion from 15% to 12%.

The Bank for International Settlements has published new research showing that even tiny increases in what traditional banks pay depositors can significantly slow the flow of money into stablecoins. The working paper analyzed the relationship between U.S. bank deposit rates and stablecoin circulation, finding that a rise of just one basis point — 0.01 percentage points — in deposit rates was associated with a drop in stablecoin growth from 15% to 12% over a ten-week period.

The finding suggests stablecoins compete directly with bank deposits for saver attention, and that their growth is not purely driven by demand for blockchain rails or crypto trading but also by the opportunity cost of holding dollars in a bank account that pays little or nothing. During the period of near-zero interest rates that followed the 2020 pandemic, stablecoin supply expanded rapidly; as rates rose in 2022 and 2023, growth slowed and in some quarters reversed.

The BIS paper does not recommend policy action, but it frames stablecoins as yield-sensitive instruments rather than a separate asset class. If banks were to raise deposit rates even modestly, the research implies, they could recapture deposits that have migrated to USDC, USDT and similar instruments. The question for savers is whether the convenience and programmability of stablecoins outweighs the interest foregone by holding them instead of a high-yield savings account.

Stablecoin issuers earn returns by investing reserves in short-term U.S. Treasuries and other liquid instruments, often yielding 4% to 5% in the current rate environment. Most of that income is retained by the issuer; only a handful of newer entrants, such as the Open USD alliance that includes Coinbase, pass a share of reserve income to partners or holders. Circle, the largest regulated issuer after Tether, has so far defended its model of retaining substantially all reserve income.

The research arrives as regulators worldwide debate stablecoin frameworks. The European Union has implemented MiCA rules requiring full reserve backing and daily attestations; the United States has draft legislation that would subject issuers to bank-like supervision. If those frameworks also impose interest-rate caps or require issuers to share yield with holders, the competitive dynamics analyzed by the BIS could shift further in favor of traditional banks.

For ordinary savers, the practical implication is straightforward: the spread between what your bank pays and what a stablecoin effectively yields — after accounting for smart-contract risk, regulatory uncertainty and lack of deposit insurance — determines where your dollars will sit. A modest rate hike by your bank may be enough to tip the balance, and the BIS data suggests millions of dollars have already moved in response to exactly that calculus.