BIS Study: Higher Deposit Rates Could Temper Stablecoin Adoption

The findings add weight to an ongoing debate, which has sparked warnings from top banking executives. In January, Bank of America CEO Brian Moynihan cautioned that up to $6 trillion in deposits could shift into stablecoins and similar yield‑bearing products, potentially curtailing banks’ lending capacity and pushing up borrowing costs.

The impact hinges in part on where issuers allocate their reserves. A December analysis by Federal Reserve staff highlighted that funds parked in stablecoins can flow back to banks as issuer deposits, altering the composition of banks’ funding sources even if overall deposit levels stay constant.

Larger, uninsured balances may force banks to hold more liquid assets, thereby reducing the pool of capital available for the long‑term loans that financial institutions typically originate.

Offering higher rates to retain customers also lifts banks’ funding costs. The Federal Reserve’s analysis proposed that banks could tailor more attractive rates to customers with higher churn risk, while maintaining lower rates for less mobile depositors.

The BIS paper does not conclude that bank deposits or lending are being lost. It examines a single high‑rate episode, and its conclusions may evolve as yield‑bearing stablecoins and tokenized money market funds become more prevalent.

Banks “retain some influence over the pace of that adoption through deposit pricing,” the authors concluded.

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