Federal Reserve Rate Shifts Slow Dollar Stablecoins
A single basis-point readjustment in U.S. bank deposit rates lowers the subsequent ten-week growth rate of dollar-backed stablecoins by about three percentage points. That mechanism is detailed in a working paper published by the Bank for International Settlements (BIS).
As tokenpost.kr reported, the analysis does not mean total market capitalization shrinks by 3%. Instead, a historical average ten-week growth rate of 15% slows to approximately 12% following a rate change.
Examining USDC and USDT Market Disparities
Numbered 1382 and released on Jan. 13, the research paper examines weekly U.S. data spanning from January 2019 to June 2025 using ordinary least squares (OLS) estimations. The downward effect on growth is more pronounced for USD Coin (USDC) than for Tether (USDT).
The BIS stated that this disparity aligns with the interpretation that USDC maintains closer ties to U.S. depositors, though specific asset-level estimates were omitted from the research summary.
Controlling Variables and Instrumental Estimates
To isolate the findings, the study controls for federal fund rates, Treasury yields, exchange rates, Bitcoin prices, financial market volatility, and broader crypto market trends.
Researchers utilized a non-linear dynamic—observing that bank deposit rates grow more sensitive to other short-term money market rates when policy rates exceed roughly 3%—to address potential two-way causality. Instrumental variable (IV) estimates yielded a contraction effect roughly three times larger than the baseline OLS estimates.
DeFi Protocols and Commercial Bank Deposits
The BIS noted that the results hold even when factoring in stablecoins supplied to decentralized finance (DeFi) protocols, and confirmed that non-stablecoin crypto assets display no such reaction.
While the study indicates that bank deposits and stablecoins share a partial substitution relationship in portfolio allocation, it does not prove that stablecoin expansion automatically shrinks overall commercial bank deposits or lending.
The dataset remains strictly American, leaving open whether identical effects apply to domestic deposit rates or overseas stablecoin demand.