Banks Can Slow Stablecoin Growth by Paying Depositors More
Banks may slow stablecoin growth by raising deposit rates, BIS paper finds.
In brief
Banks may slow stablecoin growth by raising deposit rates, BIS paper finds. Banks can reduce stablecoin growth by increasing deposit rates, according to a BIS working paper. Originally reported by Pymnts.
BIS Paper Finds
Banks can slow stablecoin growth by raising deposit rates, BIS paper finds.
Higher Deposit Rates Predict Slower Growth
A one-basis-point increase in deposit interest rates reduced stablecoin growth by three percentage points, to about 12%.
Stablecoin Market Growth
Stablecoin market capitalization grew by an average of 15% over a 10-week period in their sample.
USDC vs USDT Competition
The relationship was stronger for Circle’s USDC than Tether’s USDT, consistent with USDC’s closer connections to U.S. institutional users.
Banks Retain Influence
Banks retain some influence over the pace of stablecoin adoption through deposit pricing, the paper concludes.
Policy Implications
Regulators should consider whether issuers may pay holders yield and the trade-offs involved in requiring issuers to maintain some reserves in bank deposits.
At a glance
Banks can reduce stablecoin growth by increasing deposit rates, according to a BIS working paper.
