Changes in US bank deposit rates appear to affect stablecoin issuers differently. A study published by the Bank for International Settlements (BIS) on October 13 estimates that, in weekly data from January 2019 to June 2025, each 1-basis-point increase in deposit rates was associated with a 4.8% reduction in USDC's cumulative growth over the following 10 weeks. The estimated reduction for USDT was 1.9%. Treating all stablecoins as facing the same competition from bank deposits could therefore obscure differences between issuers when forecasting adoption.
The study was conducted by Rashad Ahmed and Iñaki Aldasoro. Its deposit-rate measure is an average of rates across six types of nationwide savings and money market deposit accounts. It is not the Federal Reserve's policy rate, nor does it represent the rate offered by any single high-yield savings account.
USDC responds more to deposit-rate changes
The researchers used ordinary least squares (OLS) to estimate the relationship between changes in deposit rates and stablecoin market-cap growth. Their baseline estimates for cumulative growth over 10 weeks were:
| Stablecoin | Estimated effect of a 1-basis-point deposit-rate increase on 10-week cumulative market-cap growth |
|---|---|
| USDC | Down 4.8 percentage points |
| USDT | Down 1.9 percentage points |
The negative estimates indicate slower growth relative to the comparison path in the model. They do not mean that the token's market value necessarily falls by the same proportion.
The researchers suggest USDC's stronger response may reflect its use by US institutional and decentralized finance (DeFi) users, who may be more likely to compare the returns on bank deposits with those on stablecoin balances. USDT has a wider presence in offshore markets and developing economies, where holders may face different banking options and make different decisions about where to keep their funds.
The data cannot identify which holders moved funds or which bank accounts were involved. The proposed explanation for the difference between issuers is therefore an interpretation of the statistical results, not a direct observation of individual capital flows.
Aggregate estimates vary with the model
In the baseline model covering stablecoins as a whole, a 1-basis-point increase in deposit rates corresponded to an estimated 2.8% reduction in cumulative growth over 10 weeks. The study also used an instrumental-variable approach to separate deposit-rate repricing from other factors. That model produced a larger estimated effect: a 9.1% reduction in growth.
The instrument draws on a pattern in banks' rate-setting: they tend to pass policy-rate changes through to deposit rates more fully when the midpoint of the federal funds target range was at least 3.125% four weeks earlier. The model also controls for the policy rate, US Treasury yields, the price of bitcoin, the US dollar index and market volatility, aiming to distinguish competition from deposit returns from broader changes in the investment environment.
The method has limitations. The study reports a first-stage F-statistic of 9.78, below the commonly used reference value of 10 cited by the authors. The sample also includes only one period that met the high-rate condition, leaving limited evidence on whether the larger 9.1% estimate would hold in another rate cycle.
In the instrumental-variable model's chart, the 95% confidence interval for USDC's 10-week estimate remains below zero, while USDT's interval includes zero. The researchers also tested the direction of the relationship by comparing repricing across deposit tiers. Checks involving the Silicon Valley Bank event, crypto-market events, trading volumes and DeFi yields continued to show a negative relationship. However, the estimated response of stablecoin balances deposited in lending protocols was imprecise.
Overall, the study supports a link between competition from bank deposits and stablecoin growth. The estimated size of the effect depends on the model, sample period and identification method used.
Exchange rewards affect the return holders compare
The return on a stablecoin balance also depends on where it is held. In a separate study published on June 19, the BIS divided exchange rewards for stablecoin holders into two broad types.
The first is funded by income from reserve assets: an issuer or exchange passes some of the revenue generated by reserve holdings to users. The second is tied to user activity, with payouts linked to lending, trading and other market activity. The study used Coinbase and Binance as examples of these two models, while noting that the distinction is not always clear-cut in practice.
Historical data showed that yields on USDC held at Coinbase tracked policy rates and reserve-asset yields more closely. Yields on Binance were more responsive to activity in crypto markets. The two models draw on different sources of funds, and their returns change for different reasons.
Coinbase's current USDC Rewards terms describe the program as an exchange-funded loyalty scheme. Coinbase says it will not use or lend customers' USDC without their instructions. To participate, users must be in an eligible region, be eligible to trade and hold at least $1 in USDC. In some regions, including the US and UK, users must also have a Coinbase One membership.
Reward rates vary by country and account type and may be changed by the platform. Coinbase can amend or end the program. Its public information directs users to check the rate applicable to their account and does not confirm a single current annualized rate for all US USDC holders. Coinbase also says that USDC held in its accounts is not a bank deposit and is not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC).
As a result, comparing a bank deposit with an exchange balance requires more than looking at the headline rate. Actual returns depend on eligibility, membership fees, location and the protections that apply to the assets. Exchange rewards were available during parts of the study period. The researchers acknowledged the influence of third-party yields and included a DeFi-yield variable in robustness checks, but that variable does not directly measure Coinbase's current membership requirements or capture the specific rewards different exchanges offer to different account types.
Stablecoin returns may come from bank deposit interest, income on an issuer's reserves, exchange rewards or DeFi lending. These sources differ in how they are funded, the risks involved and the factors that drive changes in returns.
USDC growth is not a measure of lost bank lending
Stablecoin funds may ultimately be reinvested and redistributed among banks and types of depositors, depending on issuers' partners and cash-management arrangements. Changes in stablecoin balances could therefore affect banks' funding costs. But the study primarily addresses a different question: how does stablecoin demand change when banks raise deposit returns?
USDC's greater sensitivity to deposit rates cannot be translated directly into an estimate of how much lending capital banks have lost. That would require knowing which financial institutions hold stablecoin reserves, how banks replace any affected funding and whether they subsequently change lending.
Nor can the study's estimates of stablecoin responses to deposit-rate changes be applied directly to any particular Federal Reserve rate increase or cut. The policy rate, banks' deposit-rate repricing and the returns platforms actually offer stablecoin holders are related, but distinct, variables.
For adoption forecasts, the findings point to the need to account separately for USDC and USDT user bases, holders' locations, the scale of bank deposit-rate changes and users' eligibility for exchange rewards. Assessing whether the historical relationship will persist in another rate cycle will require new data linking issuer growth to the bank and platform returns available to comparable users.