Analysis
The first quantitative evidence of deposit rate leverage over stablecoin demand creates a structural ceiling that the infrastructure buildout cannot outrun.
The industry has spent the year cataloging the supply-side buildout with predictable enthusiasm. We have watched Visa Direct move stablecoin-powered cross-border payments into commercial production, while Mastercard has wired its Global Money Platform into 130 countries. The metrics are functional enough, with stablecoin payment volume exceeding $400 billion in the first eight months of 2026. Yet, this infrastructure-first narrative, while technically accurate, tends to obscure a persistent, structural ceiling on the demand side: the humble bank deposit rate, which remains a stubborn gravitational force for capital.
A new BIS Working Paper #1382, authored by Rashad Ahmed and Iñaki Aldasoro, provides a sobering look at why stablecoin adoption is not just a matter of better technology, but a tug-of-war with traditional banking. By analyzing weekly US data from 2019 to 2025, the authors found that stablecoins and bank deposits are indeed substitutes. The mechanism is straightforward: when banks raise their deposit rates, stablecoin growth takes a hit. Using OLS estimates, the researchers found that a 1-basis-point increase in bank deposit rates cuts typical 10-week stablecoin growth by roughly 3 percentage points. When they applied IV estimates to account for the fact that banks reprice deposits more aggressively once the federal funds rate crosses the 3% threshold, the impact was roughly three times larger.
The nuance in the data is particularly telling. The study highlights a distinct differential between stablecoins: USDC saw approximately 4.8 percentage points of growth lost per basis point of deposit repricing, compared to just 1.9 percentage points for USDT. The authors attribute this to USDC’s closer ties to US depositors, suggesting that the more integrated a stablecoin is with the domestic banking system, the more sensitive it becomes to the yield offered by that very system. It is a classic case of the innovator being held hostage by the incumbent’s ability to simply pay more for the privilege of holding capital.
This dynamic is now being codified into law, creating a pincer movement on stablecoin growth. The GENIUS Act, signed into law in July 2025, includes a specific provision in Section 4(a)(11) that states: No permitted payment stablecoin issuer or foreign payment stablecoin issuer shall pay the holder of any payment stablecoin any form of interest or yield solely in connection with the holding, use, or retention of such payment stablecoin.
With the effective date looming on January 18, 2027, issuers are effectively barred from competing with bank deposit rates directly. It is worth noting, however, that this prohibition applies only to the issuers themselves. Crypto exchanges and third-party platforms remain free to pay interest on stablecoins held on their platforms, creating a bifurcated market where the yield is decoupled from the underlying asset’s issuance.
As the industry gathers at the Money20/20 Blockchain Summit this week, it is worth keeping a few caveats in mind. The BIS study covers a period of high US interest rates between 2022 and 2025, during which stablecoins generally paid holders no interest. Consequently, the paper does not prove that stablecoin growth has actually reduced bank deposits or lending; it merely demonstrates a correlation in growth patterns. The authors are careful to note that their findings hold across various deposit products and stablecoins supplied to DeFi protocols, but they do not extend to non-stablecoin cryptoassets. The stablecoin is a unique beast, tethered to the banking system in ways that Bitcoin or Ethereum are not.
The infrastructure buildout is real, and the $400 billion in volume confirms that stablecoins have secured a niche in global payments. But the demand side does not operate in a vacuum, and the GENIUS Act has effectively stripped issuers of their ability to compete with bank deposit rates, leaving growth tethered to the utility of the rails rather than the attractiveness of the yield. For those building the future of finance, the question is no longer just about velocity; it is whether stablecoin utility can actually transcend the structural opportunity cost of a standard savings account, or if the sector is destined to remain a secondary layer for those who simply cannot access a bank.
Nolan Pratt works for Forkast.
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