Bank for International Settlements economists say higher savings rates can pull users away from tokens like USDC.
Economists at the Bank for International Settlements have published analysis linking commercial bank deposit rates to the pace of stablecoin adoption. The research focuses on USDC, the dollar-pegged token issued by Circle, and finds that when banks raise the interest they pay on savings accounts, demand for stablecoins weakens.
According to the findings, a rise in bank deposit rates can reduce stablecoin growth by roughly three percentage points. That is a modest but notable figure for a market that has expanded rapidly over the past several years. The BIS frames this relationship as evidence that banks are not powerless against stablecoin competition.
Stablecoins like USDC have grown in part because they offer holders a way to earn yield or simply park dollars outside the traditional banking system. During periods of low interest rates, bank savings accounts offered little incentive to keep funds there instead. That dynamic shifted as central banks raised rates to combat inflation, making traditional deposits more attractive again.
The BIS research suggests this shift in incentives has already shown up in stablecoin growth data. When banks pass higher policy rates through to depositors, some capital that might otherwise flow into stablecoins stays in conventional accounts. This creates a direct, measurable substitution effect between the two forms of holding dollars.
The analysis carries implications for how regulators and bankers think about stablecoin competition. Rather than relying solely on new rules or restrictions, banks could respond to stablecoin growth by adjusting the rates they offer savers. This reframes the stablecoin debate as partly a matter of pricing and market competition, not just regulation.
The BIS is an institution often described as a bank for central banks, and its economic research frequently shapes global monetary policy discussions. Its findings on stablecoins arrive as regulators worldwide continue debating how to oversee the fast-growing sector. The work adds an economic dimension to a conversation that has largely centered on legal and prudential frameworks.
Market Impact
If the BIS findings hold up under further scrutiny, they suggest stablecoin issuers like Circle may face growth headwinds tied to broader interest rate cycles. Periods of rising bank deposit rates could dampen demand for non-yield-bearing stablecoins, while rate cuts could reverse that effect and support renewed inflows.
For banks, the research implies a competitive tool already within reach. Rather than waiting for new stablecoin regulation, lenders could adjust deposit pricing to retain funds that might otherwise migrate to tokenized dollar products. This could influence how banks structure savings products as stablecoin adoption continues to expand.
The BIS analysis adds empirical weight to the idea that stablecoin growth is sensitive to ordinary interest rate dynamics, not just regulatory developments. It gives banks a data-backed argument that they can compete with digital dollar tokens through pricing alone.
Frequently Asked Questions
What did the BIS analysis find about USDC and bank deposit rates?
The BIS found that when banks raise deposit interest rates, growth in stablecoins such as USDC slows by roughly three percentage points, based on its economists' research.
Why would higher bank interest rates affect stablecoin demand?
Stablecoins often attract users seeking yield or dollar exposure outside traditional banks. When savings accounts offer more competitive rates, some of that demand shifts back toward conventional deposits.
Does this mean banks can stop stablecoin growth entirely?
No. The BIS research describes a partial effect, a few percentage points of slower growth, not a reversal or elimination of stablecoin demand.
What is the Bank for International Settlements' role in this research?
The BIS, an institution that supports central bank cooperation and economic research, published the analysis as part of its broader study of digital assets and monetary policy.
