Banks Regulate Stablecoin Growth with Deposit Rate Hikes
Key Summary
A Bank for International Settlements working paper found that stablecoin growth slows when US banks raise deposit rates, with Circle's USDC being the most sensitive to this effect.
Precedent & Market Context
The Bank for International Settlements (BIS) has published a working paper that highlights the impact of US bank deposit rates on stablecoin growth. The paper, authored by BIS economist Iñaki Aldasoro and Rashad Ahmed, examines weekly US data from January 2019 to June 2025. This study is part of the BIS's ongoing efforts to understand the relationship between the traditional financial system and the emerging digital asset market.
The paper's findings suggest that when US banks raise their deposit rates, stablecoin growth slows down. The effect is more pronounced for Circle's USDC, which is closely linked to US users. This implies that regulators should consider whether stablecoin issuers can offer competitive yields to maintain market growth.
Main Event
The BIS working paper reveals that US banks are concerned about stablecoins encroaching on their customer base. To counter this, banks may increase deposit rates, which in turn slows down stablecoin adoption. The study's authors note that this dynamic is already evident in the market, with Circle's USDC being the most sensitive to changes in bank deposit rates.
Analysis & Market Impact
The BIS paper's findings have significant implications for the stablecoin market. As US banks continue to raise their deposit rates, stablecoin growth is likely to slow down. This could lead to a decrease in the adoption of stablecoins, particularly among US users. The study's authors recommend that regulators consider the competitive yield offered by stablecoin issuers to ensure market growth.
Implications & Outlook
The BIS working paper's findings highlight the need for regulators to strike a balance between promoting financial stability and supporting innovation in the digital asset market. As the stablecoin market continues to evolve, regulators must consider the impact of their decisions on market growth and stability. The paper's authors suggest that issuers should focus on offering competitive yields to maintain market growth and attract users.
- Stablecoin growth slows down when US banks raise deposit rates.
- Circle's USDC is the most sensitive to changes in bank deposit rates.
- Regulators should consider whether stablecoin issuers can offer competitive yields to maintain market growth.
A photograph of a bank's headquarters building, with a subtle background of a stablecoin chart on a computer screen, conveying the intersection of traditional finance and digital assets.