BIS: STABLECOINS AND BANK DEPOSITS ACT AS SUBSTITUTES

Summary from the TLDR Crypto newsletter

A BIS working paper using US data finds stablecoins and bank deposits are direct portfolio substitutes. A 1-basis-point rise in bank deposit rates cuts 10-week stablecoin market cap growth by about 3 percentage points, and by up to about 9 under an IV approach. The effect is stronger for USDC (-4.8%), which is tied to the US onshore market, than for offshore-focused USDT (-1.9%). It also holds against bank CD rates and DeFi lending yields. The conclusion is that bank deposit pricing acts as a drag on stablecoin growth.