--- title: "BIS Working Paper Identifies Stablecoins as Substitutes for Bank Deposits" description: "Researchers found that rising bank deposit yields curbed reserve-backed stablecoin growth, with a more pronounced effect observed on USDC." url: https://basisdesk.news/news/bis-working-paper-stablecoins-bank-deposits-substitutes published: 2026-10-19T10:02:21.160Z modified: 2026-10-19T10:02:21.160Z section: Stablecoins & Payments author: Basis Desk Newsroom (AI-generated, source-verified) sentiment: neutral tickers: [BTC, USDC, USDT] tags: [BIS, stablecoins, USDC, USDT, banking, monetary policy] license: Quote with attribution to Basis Desk (basisdesk.news). Not financial advice. --- # BIS Working Paper Identifies Stablecoins as Substitutes for Bank Deposits Researchers found that rising bank deposit yields curbed reserve-backed stablecoin growth, with a more pronounced effect observed on USDC. ## At a glance - **What happened:** A BIS working paper found that higher commercial bank deposit rates predict slower market capitalization growth for reserve-backed stablecoins. - **Why it matters:** The findings show that bank deposit pricing directly impacts stablecoin demand, potentially influencing monetary policy transmission as adoption grows. - **Who is affected:** Stablecoin issuers, commercial banks, decentralized finance participants, and US dollar depositors. - **What's next:** No next step announced. - **Primary source:** [Are stablecoins and bank deposits substitutes? | Bank for International Settlements](https://www.bis.org/publications/working-paper-1382-are-stablecoins-and-bank-deposits-substitutes) — bis.org ## Key points - A BIS working paper using data from January 2019 to June 2025 found stablecoins and bank deposits act as partial substitutes. - Higher bank deposit rates curb stablecoin growth, demonstrating a stronger contraction effect on USDC than USDT. - The substitution relationship held across deposit tiers and DeFi protocols, but was absent in non-stablecoin cryptocurrencies. ## Editorial remark - **Context:** Reserve-backed stablecoins provide payment and liquidity functions comparable to bank deposits while generally offering minimal or zero native yield to holders. - **Impact:** Commercial bank deposit pricing directly influences the capitalization trajectory of major stablecoins, especially tokens with significant US user bases like USDC. - **Watch:** Central bank policy rate adjustments and commercial bank deposit rate pass-through trends heading into subsequent quarters. A Bank for International Settlements (BIS) working paper concluded that reserve-backed stablecoins function as partial substitutes for bank deposits, with higher commercial deposit yields leading to slower growth in the stablecoin sector [1]. Researchers analyzed weekly US market data spanning from January 2019 to June 2025 to evaluate how changes in deposit pricing influence user capital allocation [1]. According to the working paper, banks reprice deposits more aggressively when the federal funds rate surpasses roughly 3% [1]. Measuring against an average 10-week stablecoin growth baseline of 15%, ordinary least squares estimates indicated that stablecoin growth slowed by approximately three percentage points per basis point of deposit repricing [1]. Instrumental variable estimates suggested an impact approximately three times larger [1]. The researchers noted that the deceleration was more pronounced for $USDC than for $USDT, attributing the discrepancy to USDC's closer links to US depositors [1]. ## Implications for Banking and Monetary Policy The study accounted for external factors, including Treasury yields, exchange rates, broad financial volatility, and the price of $BTC [1]. The substitution dynamics held across varying deposit tiers and extended to stablecoins committed to decentralized finance protocols, but did not emerge when testing non-stablecoin cryptoassets [1]. At the time of writing, USDT traded at $0.9989 and USDC held at $1.00 as total crypto market capitalization stood at $2.75 trillion. The findings show that commercial bank deposit pricing directly influences the expansion of stablecoin capitalization [1]. Although the authors clarified that stablecoin growth does not necessarily reduce aggregate bank lending or deposit volumes, widespread adoption could alter bank funding conditions and traditional monetary policy transmission [1]. Further analysis on these dynamics links to broader coverage in a [BIS paper on bank deposit rates](https://basisdesk.news/news/bis-study-bank-deposit-rates-slow-stablecoin-growth), while related research details how [stablecoin payments jumped 45%](https://basisdesk.news/news/stablecoin-payments-jump-allium-q3-report) through September despite shifting supply dynamics. ## FAQ **What did the BIS study conclude about stablecoins and bank deposits?** The study found evidence that stablecoins and bank deposits are partial substitutes, with higher bank deposit rates leading to slower growth in stablecoin market capitalization. **Why was the impact larger on USDC than USDT?** The researchers attributed the stronger substitution effect observed in USDC to its closer operational and user connections to US depositors. ## Sources 1. [Are stablecoins and bank deposits substitutes? | Bank for International Settlements](https://www.bis.org/publications/working-paper-1382-are-stablecoins-and-bank-deposits-substitutes) — bis.org, 2026-10-13 --- Basis Desk Newsroom · AI-generated, source-verified · https://basisdesk.news/about/how-we-use-ai