Your 'digital dollars' aren't a new frontier of finance; they're just bank accounts that don't pay interest.
April 15, 2026
Original Paper
Are Stablecoins and Bank Deposits Substitutes?
SSRN · 6457260
The Takeaway
Crypto enthusiasts often argue that stablecoins are part of a separate, 'decentralized' ecosystem that operates independently of traditional banking. This research proves the opposite, showing that when traditional bank deposit rates go up, the growth of the stablecoin market cap slows down significantly. This empirical link proves that stablecoins and bank deposits are direct substitutes for each other in the eyes of investors. For the average person, it reveals that the 'revolution' of crypto is still tethered to the same old interest rate cycles that govern every other boring savings account. If your 'crypto' moves when the Fed moves, it's just a digital version of the traditional bank system you thought you were leaving behind.
From the abstract
We test whether stablecoins and bank deposits act as substitutes. Using local projections fit to weekly U.S. data from January 2019 to June 2025, we find that deposit rate increases predict slower stablecoin market capitalization growth. To address endogeneity, we exploit a nonlinearity in deposit rate pass-through. Unlike other money market rates, banks reprice deposits more aggressively once the federal funds rate exceeds approximately 3%. Against average ten-week stablecoin growth of 15%, ord