Crypto14 October, 20262 min read
BIS Paper Finds Higher U.S. Deposit Rates Slow USDC Growth More Than USDT
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A 1 basis point rise in U.S. bank deposit rates slows stablecoin growth. USDC growth slows more than USDT as deposit rates rise.
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Deposit rates slow USDC
A Bank for International Settlements working paper found that a one basis point rise in U.S. bank deposit rates predicted slower stablecoin growth, cutting average ten-week growth in stablecoin market capitalization from about 15% to about 12%. The BIS researchers Rashad Ahmed and Iñaki Aldasoro reported that the effect was stronger for Circle’s USDC than Tether’s USDT, and they linked that pattern to USDC’s closer ties to U.S. users. The BIS paper said banks could still retain some influence over stablecoin adoption through deposit pricing, even as growth slowed but did not reverse.
The BIS working paper also described an adjusted estimate in which the effect was roughly three times larger, slowing growth to about 6%, while the authors flagged weakness in that method. A separate write-up of the BIS October 13 study said a one basis point rise in the deposit rate was associated with about 4.8% lower cumulative USDC growth over ten weeks, compared with about 1.9% lower growth for USDT.
BIS links competition to liquidity
The BIS working paper described a relationship in which a one-week, one basis point rise in average bank deposit rates predicted slower stablecoin growth, with the paper’s authors saying the findings add evidence to a debate that has drawn warnings from bank executives. 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. The BIS paper said the relationship did not prove that every dollar entering a stablecoin necessarily meant a dollar leaving the banking system, but it did suggest both instruments begin to compete for the same liquidity.
The BIS working paper said deposits are a major source of funding banks use to extend loans, and it warned that a significant migration to stablecoins could alter the cost of funding in the banking system and eventually affect monetary policy transmission. The BIS working paper also said the relationship was particularly pronounced for USDC, and it described the effect as consistent with USDC’s closer ties to U.S. users.
Banks build tokenized-deposit rails
The Clearing House said it would use Quant technology to build its On-Chain Money Initiative, aiming to enable financial institutions to clear and settle tokenized deposits with one another. DiarioBitcoin said the infrastructure is designed to link blockchain operations with traditional banking systems, and it described first availability planned for participating institutions in the first half of 2027. Mastercard launched on October 15 a platform that integrates stablecoins and already anticipates support for tokenized deposits, as the article described an accelerating race among Mastercard, Wells Fargo, The Clearing House, and dozens of financial institutions.
DiarioBitcoin said dollar-denominated stablecoins represent more than 99% of the global stablecoin market, while the BIS found evidence that stablecoins and bank deposits already function as partial substitutes. DiarioBitcoin concluded that the battle for the digital dollar has already begun, with USDT and USDC together exceeding USD 257 billion in circulation.