Stablecoins compete directly with traditional bank deposits for customer funds, according to new research published by the Bank for International Settlements (BIS), adding empirical evidence to concerns about the growing role of digital dollars in the financial system.
The October 13, 2026 working paper, titled Are Stablecoins and Bank Deposits Substitutes?, examines how changes in US bank deposit interest rates influence demand for reserve-backed stablecoins. Authored by Rashad Ahmed and BIS economist Iñaki Aldasoro, the study analyzes weekly US financial data from January 2019 through June 2025.
Researchers found that higher bank deposit rates were followed by slower growth in stablecoin market capitalization, indicating that consumers and investors respond to the relative attractiveness of the two assets.
The findings suggest that stablecoins increasingly compete with conventional banking products for liquidity, although the study does not establish that stablecoin adoption necessarily reduces aggregate bank deposits or lending.
Higher Deposit Rates Slow Stablecoin Growth
The researchers examined the relationship between deposit rates and stablecoin capitalization while accounting for broader financial conditions, including Treasury yields, exchange rates, Bitcoin prices and market volatility. Their analysis found that increases in deposit interest rates were associated with slower stablecoin expansion over subsequent weeks.
Against average stablecoin growth of approximately 15% over a ten-week period, the study’s ordinary least squares estimates indicated a reduction of roughly three percentage points for each basis point of deposit repricing. Alternative estimates using instrumental variables produced effects approximately three times larger.
The researchers also identified a nonlinear relationship between Federal Reserve policy rates and bank deposit pricing. Banks tended to adjust deposit rates more aggressively once the federal funds rate exceeded approximately 3%, creating conditions in which conventional deposits became more competitive.
The substitution effect was stronger for Circle’s USDC than for Tether’s USDT, consistent with USDC’s closer relationship with US financial institutions and depositors. Similar results appeared across different bank deposit products and stablecoins supplied to decentralized finance protocols.
Importantly, comparable effects were not observed for cryptocurrencies outside the stablecoin category, strengthening the argument that the relationship reflects competition between monetary assets rather than general cryptocurrency market movements.
Stablecoin Adoption Could Reshape Bank Funding
The findings have implications for banks because deposits represent an important source of funding for lending and other financial activities. If customers increasingly transfer funds into stablecoins, banks may face pressure to offer more competitive deposit rates, potentially increasing funding costs.
However, the ultimate impact depends partly on how stablecoin issuers manage their reserves. Funds transferred from retail bank deposits into stablecoins may return to the banking system as institutional deposits or be invested in short-term government securities.
Such changes could alter the composition and stability of bank funding without necessarily reducing total deposits. The BIS explored these risks in its June 2026 Annual Economic Report, warning that widespread stablecoin adoption could affect bank liquidity, credit provision and monetary policy transmission. The institution also highlighted differences between stablecoins and tokenized bank deposits, particularly regarding redemption guarantees, regulatory oversight and settlement arrangements.
Despite their growth, stablecoins remain substantially smaller than the conventional banking system. The BIS estimated global stablecoin capitalization at approximately $320 billion at the end of May 2026, compared with trillions of dollars held in traditional bank deposits. The latest research therefore identifies an emerging competitive relationship rather than evidence of a systemic banking disruption.
Its central implication is that stablecoin adoption may increasingly depend on conventional bank pricing, while wider adoption could eventually influence how banks attract deposits and finance lending.