Stablecoins and Bank Deposits Compete for Funds, BIS Research Finds

Stablecoins and bank deposits are competing for the same pool of funds, according to new research published by the Bank for International Settlements (BIS), raising questions about how the growth of digital currencies could affect bank funding and monetary policy.

The research finds that higher interest rates on bank deposits are associated with slower growth in stablecoins, suggesting that the two instruments are partial substitutes rather than entirely separate financial products.

The findings, published in BIS Working Paper 1382, Are Stablecoins and Bank Deposits Substitutes?, add a new dimension to the debate over the relationship between stablecoins and the traditional banking system, particularly as dollar-denominated tokens gain traction in payments and financial markets.

Using weekly US data covering January 2019 to June 2025, researchers Rashad Ahmed and Iñaki Aldasoro examined how changes in bank deposit rates affected the market capitalisation of reserve-backed stablecoins. They found that increases in deposit rates were followed by slower stablecoin growth, with the relationship considerably stronger for USDC than USDT. The researchers suggest this is consistent with USDC’s closer links to US depositors.

The analysis found that, against average stablecoin growth of 15% over ten weeks, a one-standard-deviation increase in deposit rates was associated with a reduction in stablecoin growth of approximately 2.4 percentage points. An alternative estimation method produced effects roughly three times larger.

The relationship remained evident after accounting for broader interest rate conditions, Treasury yields, bitcoin prices, exchange rate movements and volatility in financial markets. Importantly, the researchers found no equivalent relationship for cryptocurrencies other than stablecoins.

The findings suggest that stablecoin demand is influenced not only by activity in cryptocurrency markets but also by the relative attractiveness of conventional bank deposits.

This has implications for banks and policymakers as stablecoins become more integrated into mainstream financial services. Unlike interest-bearing bank deposits, stablecoins generally offer little or no yield, meaning changes in deposit rates can alter the incentive to hold one instrument over the other.

For banks, the potential competition raises questions about deposit pricing and funding costs. For central banks, it introduces another consideration into the transmission of monetary policy, particularly if stablecoins become a more significant component of the financial system.

The researchers are careful, however, not to conclude that stablecoin growth necessarily results in an equivalent reduction in aggregate bank deposits or lending. Their analysis establishes evidence of substitution in investors’ allocation of funds, rather than demonstrating that stablecoins are draining liquidity from the banking system.

For wholesale financial markets, the findings are particularly relevant as stablecoins increasingly feature in discussions about cross-border payments, settlement and the movement of liquidity between traditional and digital asset markets.

While the research does not directly examine institutional FX trading or settlement, it suggests that the economics of holding dollar liquidity in tokenised form cannot be separated from the interest rate environment in the conventional banking system.

As stablecoins develop beyond their origins in cryptocurrency trading, their relationship with bank deposits may therefore become an increasingly important consideration for financial institutions managing liquidity across traditional and digital markets.